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View Full Version : What Percentage Of People Do You Think Would Sign Up For Voluntary Personal Accounts?


RINGLEADER
03-05-2005, 11:34 AM
What choice would you make if Social Security reform became a voluntary option for those under 45 between staying with the existing system and receiving the same level of guaranteed benefits now projected or having half of the social security contribution go to help pay for those staying in the old system while using the other half to set up personal accounts?

1. Stay with the existing system and receive 1-2% on your full contribution.

2. Move to the new system and receive 6-8% on half your contribution with the understanding that you could receive less or more based on the type of investment you made.

Personally, I think the vast majority of Dems who now bemoan the plans for personal accounts (along with most from the GOP and Indie columns), would pick plan number two. Even if you go into annuities and long-term bonds it would be next to impossible to get anything less than 6% or 7%.

The fact that Bush is proposing plan number 2 IN ADDITION to payouts from the existing social security system makes it even more inticing, but if you simply GIVE AWAY that half of your contribution not being invested in personal accounts (as well as any contributions you've made to date) to fund those who elect to stay in the old program as we well as those over 45, you STILL come out on top versus the current system.

If you're 30 or under it's almost 2-1 at 7%...almost 3-1 at 9%...and more than 5-1 if you reach historical stock averages of 11%.

If you're 40 or under it's 25% better at 7%...almost 2-1 at 9%...and almost 3-1 at 11%

Plus, that doesn't even begin to address the fact that under social security you get a check and under the personal account plan you get an actual nestegg of cash that you control and can give to your heirs (as well as draw interest from). Or that you'll only receive 73% of the currently projected benefit in 2042 under the current program. Or that the current program will start bankrupting the country to continue. Or that a worker who averages just $15,000.00 per year over only twenty years would reach retirement with almost $33,000 in their account.

From an actuarial perspective you could even provide additional support for lower income workers who live more than 15 years beyond retirement age with a secondary support mechanism (i.e., if you retire below a certain level in your personal account you're eligible for the old system to kick in between the time the interest/draw-downs from your personal account expire or are expected to expire and when you actually die) and still come out ahead.

I know the Hillary Clinton bobble-head Dems won't go for this because it makes too much sense, but what about the rest of you?

RINGLEADER
03-05-2005, 12:08 PM
Figure an average life expectancy of 15 years beyond retirement age and an average lifetime of 30 years working and contributing to the system and the benefits of the model above (beyond addressing the solvency of the existing retirement system) becomes pretty evident even at a historically conservative estimate of 7.0% annualized returns over the worker's life (take it to 9% or 11% and you're bringing home more than twice the amount of the present system - assuming it actually pays out at the levels that are projected).

Throw in the fact that under all of these scenarios the recipient also dies with dollars in the bank after drawing down the interest and it makes the Dem arguments yesterday seem almost comical:

@ $20,000:
Average check under social security: $915
Average check under social security after 2042: $668
Average check under personal account plan: $911

@ $30,000:
Average check under social security: $1,291
Average check under social security after 2042: $942
Average check under personal account plan: $1,366

@ $40,000:
Average check under social security: $1,453
Average check under social security after 2042: $1,061
Average check under personal account plan: $1,822

and, just for grins:

@ $90,000
Average check under social security: $2,268
Average check under social security after 2042: $1,656
Average check under personal account plan: $3,929