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Politics : PRESIDENT GEORGE W. BUSH -- Ignore unavailable to you. Want to Upgrade?

To: Kenneth E. Phillipps who wrote (674567)	3/9/2005 11:20:56 AM
From: DuckTapeSunroof	Read Replies (1) \| Respond to of 769670

[by diversifying the Social Security trust fund "in a total market index fund, like most pension funds"] That's not a half-way bad idea! Of course, if they did that, the government would have to stop using the SS surpluses to disguise the true size of the federal deficits. To steal any more out of the SS fund to support other federal spending they would have to actually SELL OFF physical assets... and the public would no doubt have a lot to say about THAT in the following elections. Which is why such a sensible plan is not exactly high up on the agenda of politicians in D.C. --- they really like their smoke-and-mirrors budget accounting! Also, consider these points (more slick salesmanship and hucksterism going on): "No Free Lunch" Here's another conundrum. Those who believe that the Social Security trust fund will run out of money by 2042 are referring to the actuaries' intermediate projection, which assumes an average annual rate of growth of only 1.9 percent per year over the next 75 years. As I said in my column of Feb. 8, this is much too conservative. But for argument's sake, let's assume that this is the rate at which the economy will grow. If this is the case, there is no way that returns from stocks are going to be 4-1/2 points better than returns from bonds. Again, using long-run data, stock returns tend to be based on economic growth. This will generate a rise in earnings at a similar pace. Add in dividends, the price-boosting effects of stock buybacks along with the occasional burst of productivity, and the return from investing in stocks would more likely average about 4-1/2 percent under this scenario before adding in inflation. Bonds? Their real rate of return historically has averaged around 3-1/2 percent. If this extra point is worth diverting some of your Social Security nest egg into common stocks, remember that you don't get rewarded without taking on risk. There's no such thing as a free lunch. marketwatch.com{86CCFC4F-0078-42B8-81B6-549025A849...