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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: jackjc who wrote (26004)	2/8/2005 12:12:57 AM
From: Larry S.	Read Replies (1) \| Respond to of 110194

jackjc, No it is not just a play on words. To demonstrate this, let's examine what would happen if instead of paying my SS tax, I save the money and make a deal with my employer so that he puts an equal amount in my savings account. I agree to have the funds invested in government bonds. After all, this is my safety net so I want it in the safest instrument possible. I choose a short term treasury fund. Now I retire and I start to redeem bonds because the interest isn't enough income. I assume that I will live until I'm 90 so I set up withdrawals to grow with what I assume will be 3 percent inflation through my 90 birthday. I'm lucky and don't live longer. Now what happens as I receive benefits from the Fund or said another way, as I withdraw money. Treasuries are redeemed by the Fund to pay my benefits. The rate at which they are redeemed increases as the balance (principle amount) is reduced and interest income falls. If I'm lucky interest rates don't rise and reduce the value of my holdings. Now what happens every time a bond is redeemed? The Treasury pays. Of course, the Treasury may not have the cast on hand so it does what it does today when it needs money. It issue more bonds - borrows from the public. Now please explain to me how this is different from the situation the Baby Boomers are in or you could say how the situation SS is in as a result of the retirement of the Baby Boomers. The problem is the Unified Budget and the fact that it has been used to hide deficits. Incidentally, I've collected SS for 8 years but I didn't start until I was 70. I play tennis with three 50 year olds three evenings each week. I was one of the more fortunate and probably contributed the maximum from the time I got our of College, something I was able to do because of the GI Bill. Sure, I worked hard for what I achieved but I know men and women who worked equally hard and depend upon their SS check to live. Larry