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Re: Social security (was: Outsourcing...)

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>Since I didn't see the scarcasm button turned on, you must really be joking.
>Social Security, with a rate of return less than 2% is a joke.
Social security doesn't work like an investment--more like insurance or 
an annuity. There are all sorts of additional benefits--survivor benefits 
for widows and children or disability payments for example. (Time to 
confess some bias--My father died when I was 13, and SS survivor benefits 
made a big difference at my house.) Considering that the payments are 
guaranteed for life with a degree of inflation protection and survivors 
benefits you have to make a lot of assumptions to come up with an 
equivalent investment. 

If I were going to do it, I'd start with the yearly SS payout starting at 
62 or 65 and figure what sort of principle would pay that much between a 
yearly draw and interest paid on the present value. The total yearly draw 
is specified, but you have to guess an interest rate, which will be 
phony, since FICA benefits are paid irrespective of what the account 
draws, like an annuity. You also have to guess how long you and your 
spouse will live, but you could probably fake it. Once you guess the 
present value at the time of retirement, you can fake in what sort of 
investment during your working years would yield that value from your 
FICA deduction, allowing for the value of the insurance in case of 
premature death and the fact that the return is guaranteed.

It's real easy to take a dive when you make the comparison between FICA 
and an investment portfolio. Only a very few of us are clever and lucky 
enough to invest over the long term and make what we think we would have 
made if we'd bought Xerox when it was selling at $9 a share. It's the 
easiest thing in the world to look back and say 'All I needed to do...' 
It's a little trickier looking ahead and coming up with the same 
conclusion. 

Christopher Wright P.E.    |"They couldn't hit an elephant at
chrisw(--nospam--at)skypoint.com        | this distance"   (last words of Gen.
___________________________| John Sedgwick, Spotsylvania 1864)
http://www.skypoint.com/~chrisw



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