February 04, 2005
Back Of Napkin Privatization Costs
Using some back-of-the-metaphorical-napkin scribbling and this table, I'm figuring that someone born in 1970 would have to have their privatized account grow at 5.86% annually, in real terms, just to match the current expected benefits in Social Security.
For comparison, consider that the stock market has only grown at 6.3% in real terms over the last 100 years. The stock market is a risky beast, and not too many people beat the market. Even the professionals usually don't.
That's exposing yourself to an awful lot of risk just to match what Social Security promises right now, and what it could very conceivably deliver in full if future economic performance is in line with more moderate projections.
Why expose yourself to that risk if you don't have to? I'd rather take the risk that the economy will underperform over the next 30 years, than pressure myself to make my investments make 10% (non-inflation-adjusted) a year until I retire.
Posted by Curt at February 4, 2005 01:22 AM