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Politics : Formerly About Advanced Micro Devices

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To: Road Walker who wrote (212636)	12/4/2004 10:06:30 AM
From: RetiredNow	Read Replies (3) of 1572921

John. The Social Security problem is very similar to a home loan. Let's say you (aka the government) owe the bank (aka retiring people) $100K. You have have $100K in a savings account earning about 2%. Unfortunately, with the way things are set up now, you will end up oweing the bank more than you can pay, because the bank is chargin you loan interest of 4%, which is higher than what you're earning in the savings account. You have a choice how you pay the bank back. You can continue along your current path, which will lead you to bankruptcy. Or you can do something different. Another option for you is to take your money out of the savings account earning 2% and stick it in a conservative, but balanced portfolio of investments that will earn you 7% over the long term. In that way, you are able to pay the loan back and have a little left for other things. Privatizing social security is very similar. The government needs to estimate all social security owed to everyone and compare that to the trust fund. Then the gov't needs to sell bonds to fund the unfunded balance. Afterwards, if we start tagging a portion of the money you pay into the system, then that money can be invested more wisely than the crappy returns your social security gets now. That diversion of funds will be funded completely by the lower social security payout you get from the interest earned on your non-diverted funds. The reason we need to do this is very simple to anyone who has Finance 101 or basic finance skills. The current social security system is a ponzi scheme. The only way to save it is to eventually tag the money each individual puts in to that individual's social security number. Ultimately, that will require the political will to recognize how much is unfunded and borrow that amount in order to put a stake in the ground on the current system. Then we simply need to elminate the current system.

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