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ejclason post was excellent. I would like to add some observations:

1. The 'impending diaster' is grossly overblown. It is based on the assumption that the most optimistic growth rate for the next 50 years will be less than the average growth for the last 50 years. Conservatism in estimates is cautious but this is excessive when you consider that the economy is already growing at break neck speed.

2. If SSI's problem is that there are more retired people than workers, then investments in the stock market will not help. The stock market is not a magic box for producing goods and services. Goods and services are produced by workers and capital (i.e. machines, computers, vehicles etc.). If you have fewer workers but more retired people then either capital must become more productive, the workers must have less or the retired will have less.

What does this mean? Well say we 'invested' SSI accounts into the market. Share values would increase. How could companies support this increase? Well they could cut their costs (i.e. wages). This means workers receive less. How is that different from raising payroll taxes to fund the current SSI program? It isn't. But you say the workers get to invest in the market! Sure, but if companies cut wages, then the workers will be putting in less because their share purchases would be a % of their income. Also, remember shares are now more expensive since SSI money is flowing into the market.

How is this worse than 401(k), pension funds, IRAs etc.? Well, we loose the insurance part of SSI. SSI is social insurance not investment. It is to ensure that everyone is guranteed a bare minimum when they become too old to work. It is our bonus that the US is so prosperous that 'too old to work' has gone from meaning 'a year or two befor you die' to the beginning of a retirement that can span decades.

Market funds offer great returns but they are risky (despite the authors scoffing). People can and do loose money on the funds in their 401(k) accounts. Your employer and the government have no responsibility to reimburse you for looses in your retirement funds.

This is not to say that investing is a bad idea. Its not, I think its great. Believe it or not, the government activly encourages it by giving favored tax treatment to retirement accounts and by taxing capital gains at a rate lower than ordinary gains. Even a person who is self employed or who works for a small employer who doesn't offer 401(k)'s or pensions can go to a financial institution and open their own IRA. The author is not serious when he asserts the government doesn't let you invest 'your money.'
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