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URL:  https://boards.fool.com/i-hope-that-i-have-increased-your-appreciation-as-17670769.aspx

Subject:  Re: Thought on the current market and retirement Date:  8/11/2002  2:22 PM
Author:  Goofyhoofy Number:  73512 of 882930

I hope that I have increased your appreciation as to what is involved, why it is a good idea and, at the same time, why it is so difficult.

You post some of the issues, but ignore others. For instance, a portion of Social Security payments go to people who have never contributed. Widows of recipients, for instance, and children.

The reason your "return" looks lower is because you are not guaranteed to get back what you put in. You may get more or you may get less. In this way, SS functions as an insurance system, where many pay, and the benefit is divided unequally according to the parameters of the system set-up.

So let's take the "I have my own account, it's mine and nobody else's" model. Your return in "your portion" of the stock market does well (let's say.) Now the widows, orphans, and disabled need to be paid out of the even smaller portion which is left in the "government" part.

Ten years from now everybody says "Holy Cow! Look how well we're doing with "mine" and look how terrible the government is doing with "theirs which should be mine"!!" Rinse, lather, repeat.

You also ignore the portion of people who will have saved "mine", but who empty the "mine" bank account long before they die. Presumably we will pay them out of the "government" portion as well, which will make that part look even worse. Or we will stop paying them anything and be back where we were before the system began.

Then there are the people who "die early" and whose "mine" portion (I guess?) is willed to heirs, meaning it cannot be used to pay those people who are drawing "more" because of the life lottery. Is that how it works, or does the "mine" portion evaporate? (Indeed, that's what happens now, although it is invisible since there is no delineation between "mine" and "theirs", and therefore there isn't any political pressure to "keep it.")

It sounds very much like a car insurance plan where the company sends you back your premium at the end of the year "if you didn't use it", but nobody explains where the money comes from to pay the extraordinary costs of car repair or medical bills for those who do.
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