Monday, February 07, 2005
Retirement Wealth for Me But Not for Thee
A Hat Tip to Viking Pundit ,who makes many good points about Social security,for his posting on "Private accounts for Congress – not for America" :
"George Will has a must-read column in Newsweek titled “Harry Reid’s ‘Roulette’” and subtitled: “Members of Congress are doing very well indeed under a plan comparable to the one President Bush would allow all Americans to participate in”:
Begun in 1987, the Thrift Savings Plan, which as of December 2004 had assets of $152 billion, is a retirement-savings plan open to all civilian federal employees, including senators, and all members of the uniformed services.
They can invest as much as 14 percent of their salaries in one of five retirement funds. Consider the rate of return of C Fund, one of the five. It is a common-stock fund, so it should represent the risks that Reid thinks should terrify Americans:
In only four of 17 years has the rate of return been negative. But in 11 years the rate has been greater than 10 percent, in eight years it has been greater than 20 percent, in four years it has been greater than 30 percent. The compound annual rate of return for the last 10 years has been 12 percent, and the return over the 17 years has been 12.1 percent.
[Senate minority leader Harry] Reid participates in the plan, but opposes allowing all Americans the comparable opportunity that Bush is proposing. But if the numbers just cited are the result of roulette, the legislators should let the rest of us into the game in which they are prospering.
One of the governing tenets of 1994’s Contract with America was one stating that Congress must comply with rules imposed on the rest of America. If personal accounts are disallowed by Congress, then obviously Congress must divest itself from the Thrift Savings Plan."
I think the key point here is that the TSP and its counterpart in the University World, TIAA-CREF, do an excellent job of providing their participants with much better rates of return than does Social Security - and the funds are vested and can be left to one's heirs. Can't say that about today's Social Security. Reform will be a big topic this year and, though I'm no expert, I do think President Bush's vision is exactly right. The key is letting people have the choice to put some of their FICA Tax into Personal Accounts that build their own wealth for retirement. This approach also keeps the promise of secure payments for older workers and retirees while reducing the systems future liabilities (i.e. the future tax burden on our kids).
