Friday, September 5, 2008

Let's get real ...

Speaking in Springfield, IL last week, Joe Biden excoriated John McCain for supporting privatization of Social Security. The same lines were played again at the Democratic convention by more than one speaker. Let’s get real! That was George Bush’s proposal, and it’s not a bad one.

The fact is that you and I will never see a just return for the money we pay into Social Security. We aren’t meant to, because the government uses our money to subsidize people who don’t pay in or who pay in limited amounts. That made sense when the system was first established. But there is hardly anyone alive today who has not paid into Social Security for their entire working lives. And the Social Security Trust was breached long ago when our government decided they could “borrow” the money held in trust for the people. Pah!

Like many, I was not enthusiastic about privatizing Social Security. But, with some safeguards, I think it’s a good idea. The more I thought about Biden’s comments, the more I realized just how wrong politicians can be. He and other Democrats act like it’s a scandalous and diabolical notion. It is not.

Out of curiosity, I ran some numbers. I used a contribution rate of 12.4%, which equals the present rate plus the employer contribution. The figures below show how much money someone would have in their account after a working life of 40 years. Theses numbers are conservative, because I have used a 401k model with only 7% yearly gain. Most funds earn in excess of that. Also, I used the same wage scale throughout. Wages would increase for almost anyone over a 40 year span, but I wanted to be conservative in my estimates. For some reason Blogger won't let me post the table. Follow the link below to Dei for the numbers*.

Trust me, this is a much better return on your Social Security investment than letting the government muck with it. The Democrats should know better and they should serve the country better than to misrepresent what this could mean to future retirees.

*cross posted from dei