What if Social Security Dollars Had Been Invested In The Market?
Mark Cuban, who writes his thoughts on BlogMaverick.com, is indeed one of the smart guys.
In a recent post about the financial crisis, he writes: “And one last thing I have to mention. Does everyone realize how much bigger a disaster last week would have been had Social Security been privatized?”
I posted the following comment in response. In addition to my comment, a homework assignment for you: pick any day in Q1 2002 when the idea of investment of these funds into the market was first seriously being bandied about. Then, find and write down the value of the Dow on that day. Then, take the lowest intraday point value of the Dow last week (which would be the lowest in two years) and write it down. Tell me what the percentage return is. Then read below.
Mark,
Have to disagree on the issue of Social Security. Does it occur to any of you that the only organization out there with worse accounting practices than Lehman Brothers is the US Government?
The odds of the entire investment being wiped out are negligible, whereas instead the money has been placed into a “Trust Fund” that is and remains within arm’s reach of politicians who have “borrowed” and keep “borrowing” from it. The “borrowed” money is gone and is never coming back. At least in the market, the politicians would not be able to put their greedy hands on money in the Trust Fund.
I would go as far as to say this: if you went back five years and you put every dollar that came into the Trust Fund into the market as it entered the Trust Fund, and kept the government from “borrowing” or otherwise leveraging against it, even after the recent carnage there would still be more raw dollars left in the Trust Fund than what are actually in the trust fund today (today, it’s just a pile of IOUs that are worth about as much as Lehman bonds).
By the way, not to compound the bad news, but you know what? Don’t count on Social Security to provide anyone any kind of retirement. It won’t be there for any of us under 40.
Spreading the good cheer,
H.J.
Let me add one more point
Do you know what drove the markets so high in the 1990s? The advent and eventual widespread acceptance of the 401K account. Money came into markets like crazy, and money was put to work. And no one who put money in a 401k in 1990 is regretting the decision today.
