Saturday, November 01, 2008

 

Obama on Privatization of Social Security

ABC News focused on Obama's sitcom gaffe. But the real gaffe in the same speech are Obama's thoughts on privatizing Social Security.
"If Senator McCain is elected, we’ll have another president who wants to privatize part of your Social Security.

That ain't right," Obama said. "Can you imagine? If Social Security funds had been invested in the stock market, Americans wouldn't even need Social Security!
If every American paying into Social Security was required, instead, to put pay the same amount into privately held retirement funds, we'd probably be better off. The private funds could be regulated and insured as with FDIC bank accounts.

Despite the recent stock market losses, if all the money I have paid into SS over the last 40 years went into a well managed fund, I'd be better off. Of course, if all that money was in private hands, politicians wouldn't be able to get their hands on it to make up of budget shortfalls elsewhere.

Comments:
This article from Michael Tanner, Senior Fellow at the Cato Institute, shows that not only would you "probably" be better off investing in private accounts...you most certainly would be better off.

http://www.cato-at-liberty.org/2008/10/31/personal-accounts-for-social-security-still-best-deal/
 
If all that money had gone into a private IRA, by the time you were approaching retirement you'd probably have moved most of it out of stocks and into bonds. Anyone who retires with more than half of their net worth in the stock market is asking to be bankrupted. There are other investment vehicles that are much more secure (though the potential for growth is lower, but after age 50 or so, growth is a lower priority anyway).
 
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