Thursday, February 03, 2005

The Bush master plan for your retirement

This is what Peter Orszag had to say about the Bush plan to dismantle Social Security. Orszag, btw, is a Social Security analyst at Brookings and a former Clinton White House economist:

Under the White House Social Security plan, workers who opt to divert some of their payroll taxes into individual accounts would ultimately get to keep only the investment returns that exceed the rate of return that the money would have accrued in the traditional system.

The mechanism, detailed by a senior administration official before President Bush's State of the Union address, would hold down the cost of Bush's plan to introduce personal accounts to the Social Security system. But it could come as a surprise to lawmakers and voters who have thought of these accounts as akin to an individual retirement account or a 401(k) that they could use fully upon retirement.

"You'll be able to pass along the money that accumulates in your personal account, if you wish, to your children . . . or grandchildren," Bush said last night. "And best of all, the money in the account is yours, and the government can never take it away."

The plan is more complicated. Under the proposal, workers could invest as much as 4 percent of their wages subject to Social Security taxation in a limited assortment of stock, bond and mixed-investment funds. But the government would keep and administer that money. Upon retirement, workers would then be given any money that exceeded inflation-adjusted gains over 3 percent.

That money would augment a guaranteed Social Security benefit that would be reduced by a still-undetermined amount from the currently promised benefit.In effect, the accounts would work more like a loan from the government, to be paid back upon retirement at an inflation-adjusted 3 percent interest rate -- the interest the money would have earned if it had been invested in Treasury bonds, said Peter R. Orszag, a Social Security analyst at the Brookings Institution and a former Clinton White House economist.

"I believe you should be able to set aside part of that money in your own retirement account so you can build a nest egg for your own future," Bush said in his speech.

Orszag retorted: "It's not a nest egg. It's a loan.

"Under the system, the gains may be minimal. The Social Security Administration, in projecting benefits under a partially privatized system, assumes a 4.6 percent rate of return above inflation. The Congressional Budget Office, Capitol Hill's official scorekeeper, assumes 3.3 percent gains.

If a worker sets aside $1,000 a year for 40 years, and earns 4 percent annually on investments, the account would grow to $99,800 in today's dollars, but the government would keep $78,700 -- or about 80 percent of the account. The remainder, $21,100, would be the worker's.

Read the full article.


ChefDunn said...
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ChefDunn said...

As a 30 year old, I have known for some time now that I will never see any of the social security money that I have invested. The system has been broken for so long, that even as a teenager I realized this. For some reason the morons in Washington have just now caught on.

So the way I figure it, I will never be able to retire. Two days after I die I may be able to take a day off.

Jim said...
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Jim said...

Oooppss!! Had to re-edit comment; I made a major grammatical faux pas that only I'll ever know about!!

Actually, Chef, that's not entirely correct. I know many of your generation feel that way. I'm curious to know why that is? Could it be that certain elements who would benefit from a dismantling of the current system would like you to believe that? Until I began to educate myself on the issue, I was prone to many of the myths and misconceptions that the administration is running out daily, to try to gain support for their failed plan to dismantle a government program that has worked remarkably well.

If Social Security won't go broke until 2052 (some argue that even that date is dubious), you and I, and even my 21 year-old son will certainly receive benefits that we have payed in to receive upon retirement. With some minor adjustments, we can assure the long-term health of the program well beyond that argued date of 2052. Clinton used the surplus at the time to shore it up. Bush, on the other hand, raided the treasury of Social Security, to fund his ill-advised tax cuts for his wealth friends.

I urge you to read the info that I linked from the Ctr for American Progress. They have alot on the subject.

If Bush's plan to dismantle Soc. Security passes, then there is no guarantee of even reduced benefits, plus, the administrative costs are going to be in the $$trillions.

It amazes me daily (if not hourly), that the American public trusts anything that this lying, smirking war criminal says on any policy matter.

ChefDunn said...

I guess I don't have enough faith in the system. It seems to me, regardless of what numbers show, our lovely government seems to find a way to screw it up.

If the money is there, fine. But I'm not counting on it. I'd much rather put my money in an IRA or 401k. My wife and I have been putting the maximum into ours for years because of our lack of faith in the system.

I refuse to sit idle and "pray" that the money will be there when I need it.