Comments on: 2008 Retiree Would Have Lost $26,000 In Bush/McCain Style Private Social Security Account http://wonkroom.thinkprogress.org/2008/10/16/social-security-privatization-analysis/ Mon, 23 Nov 2009 22:07:09 -0500 http://wordpress.org/?v=2.8.5 hourly 1 By: Ricardo Cobos http://wonkroom.thinkprogress.org/2008/10/16/social-security-privatization-analysis/comment-page-1/#comment-7244 Ricardo Cobos Tue, 20 Jan 2009 00:50:04 +0000 http://wonkroom.thinkprogress.org/2008/10/16/social-security-privatization-analysis/#comment-7244 The author cited the loss but didn't cite the total value of the account or contributions and net gains the account so it is really a hit job on social security reform. After all - the alternative for someone like me who is 38 and has been a high income earner for the past 8 years and has maxed the contribution to social security and has also contributed since I was 20, if social security even exists; when I am 70 I will receive $2200 per month!!!! I'll take the 26,000 loss thank you because an account with Madoff is looking more appealing than Uncle Sam! The author cited the loss but didn’t cite the total value of the account or contributions and net gains the account so it is really a hit job on social security reform.

After all – the alternative for someone like me who is 38 and has been a high income earner for the past 8 years and has maxed the contribution to social security and has also contributed since I was 20, if social security even exists; when I am 70 I will receive $2200 per month!!!! I’ll take the 26,000 loss thank you because an account with Madoff is looking more appealing than Uncle Sam!

]]> By: woessner http://wonkroom.thinkprogress.org/2008/10/16/social-security-privatization-analysis/comment-page-1/#comment-2690 woessner Fri, 17 Oct 2008 18:59:06 +0000 http://wonkroom.thinkprogress.org/2008/10/16/social-security-privatization-analysis/#comment-2690 The report cited is DEEPLY flawed. The author did not consider the effects of dividends OR dollar cost averaging. In essence, he considered buying a broad-base index fund in 1973, squandering the dividends for 35 years and selling it in 2008. In that very specific case, yes, the real return was only 2.4%. HOWEVER, once you factor in dollar cost averaging and reinvesting dividends (like people investing for retirement do), you get a very different answer. The real return comes out to 6.55%, which is 3.55% higher than the “clawback” in the proposal to privatize Social Security. Let’s see… 3.55% compounded over 35 years… that’s a lot of money. The report cited is DEEPLY flawed. The author did not consider the effects of dividends OR dollar cost averaging. In essence, he considered buying a broad-base index fund in 1973, squandering the dividends for 35 years and selling it in 2008. In that very specific case, yes, the real return was only 2.4%.

HOWEVER, once you factor in dollar cost averaging and reinvesting dividends (like people investing for retirement do), you get a very different answer. The real return comes out to 6.55%, which is 3.55% higher than the “clawback” in the proposal to privatize Social Security.

Let’s see… 3.55% compounded over 35 years… that’s a lot of money.

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