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Politics : Formerly About Advanced Micro Devices -- Ignore unavailable to you. Want to Upgrade?

To: Raymond Duray who wrote (214540)	1/9/2005 9:25:46 PM
From: Road Walker	Read Replies (2) \| Respond to of 1572637

re: The non-partisan Congressional Budget Office just upped that estimate to 48 years. By either measure, Social Security is in better financial shape that it has been for most of its 69-year history. Next they will tell you about the "unfunded liability", looking out 75 years. Did we put the money for the Iraq war in a "lock box", fully pre-funded? Or any other government program? Watch the massive marketing program... this will be a piece of work. In the end, I think Bush will get what he wants, and the fears of the younger generations will be a self-fulfilling prophesy... they won't get a penny of their SS money. You get what you deserve... they don't have the guts (or maybe the intelligence) to drive their own government. John

To: Raymond Duray who wrote (214540)	1/10/2005 7:37:50 PM
From: RetiredNow	Read Replies (2) \| Respond to of 1572637

Lord have mercy. Teaching finance to the uneducated is pretty frustrating. But I'll give it a shot. Stay with me, Raymond. You are 21 yrs old and have a savings account earning 2% per year to which you are contributing $1,500 per month. You expect to have about $1,000,000 in 37 years, after which you will live off the $20,000 per year in income. As your financial planner, I tell you that if you cut your contributions to your savings account down to $500 and put the rest in the stock market in a horizon fund, you will earn closer to 8% on that money. The trade off is that you will only grow that savings account to $333K instead of $1 M, which means you'll only get about $6,670 in income from the savings account instead of the $20K. However, that will allow you to retire in 37 years with a combined savings and stock market amount of $3,146,000 instead of just $1,000,000. So instead of living off of just $20K per year, you can live off of $63K per year, if you took all your stock market money and put it back into the savings account at the end of 37 years. This is exactly what the Bush admin is proposing. They will let you divert some of your contributions from the SS Trust fund to your own personal account where you can invest in the stock market. The tradeoff is they will cut your benefits. Why? Because you aren't contributing as much. It's a fair tradeoff because the amount you divert will grow faster than the amount you contribute to SS Trust Fund. Why would any sane person not do that? Sure it's more risk, but there's more reward. Modern finance tells us that the longer your horizon, the more risk you should take. Anyway, I can't make it any simpler than that. If you and others don't get this basic finance example, then I'm afraid you are doomed to continue believing what you currently believe in ignorance.