Friday, February 04, 2005

ahhh, here we go. jesse taylor at pandagon brings our attention to a new york times article that does a bit more of the explanation i was looking for in my last post.

"...Here are the basics of the proposal, as described in greater detail by a senior administration official than by Mr. Bush, who called it "a better deal" for younger workers, echoing President Franklin D Roosevelt:

Beginning in 2009, workers could invest up to 4 percent of their wages in individual investment accounts up to $1,000 a year initially. The maximum contribution would rise by at least $100 a year afterward.

The program would be phased in. In 2009, this option would be available to workers born between 1950 and 1965; in 2010, workers born as late as 1978 could participate; and beginning in 2011, all those born after 1949 would be eligible.

Account holders would have to choose from a small menu of diversified stock and bond funds with varying degrees of risk, similar to the Thrift Savings Plan available to federal government workers.

The personal accounts would be administered by the government; private companies would manage the investment funds under contract with the government.

does halliburton do investment?

No withdrawals would be permitted before retirement.

When workers retired, most would be required to use at least part of their accounts to buy from the government lifetime annuities, financial instruments that provide a guaranteed monthly payment for life but that expire at death. Despite Mr. Bush's declaration that money in the accounts could be passed on to children and grandchildren, the principal of an annuity cannot be inherited.

Money left over after the annuities were purchased would belong to retirees to spend or invest as they wished and could be bequeathed.

The costs of the proposal would be substantial. Presumably all of it would be borrowed, vastly increasing a swollen budget deficit.

A senior administration official put the cost from 2009 through 2015 at $754 billion - $664 billion to pay benefits and $90 billion for interest on the money borrowed. Peter R. Orszag, a Social Security expert who served in the Clinton administration, calculated that the program would cost the government over $1 trillion in the first 10 years the accounts were in place would be over $1 trillion and more than $3.5 trillion in the second 10 years.

In the long run, the administration official said, the program would save the government money, but he was unwilling to say how long that would take."

so, it will cost more to implement this plan than the amount the plan will actually save? and this, when SS is projected a surplus for at least the next few decades? great.

The official, who spoke to reporters on the condition that he not be identified because he did not want to upstage the president, said that as a rule of thumb, workers who think their investments would earn at least 3 percent a year should participate and others should not."

hmmmm. okay, but what if you invest, thinking it's a good idea, and it turns out that you're wrong? then what?

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