GOP finger pointing begins(Rinos blame conservatives)

The Hill ^ | 4-26-05 | Bob Cusak

[NeoCaveman]

The people that would benefit most are typically not in a financial position to take advantage of an "add-on" program.

True. Those who can't afford "add ons" would not get them and those that could afford them would probably prefer to stay outside that system and go with 401k's and IRA's. Add ons are a loser of an idea.

[Eaglefixer]

First think! Private accounts are voluntary. If you don,'t want to invest don't volunteer. Don't kill it for those that know how.

[VRWCmember]

Sorry - you can call it applesauce if you want to but that's what my benefit statement said.

1. It is a PROJECTION, based on a lot of assumptions and based on plan balances and market values as of a certain date.

2. Unless you are planning to retire in the next 2 to 3 years, it would be foolish for you to make a lot of plans based on projections, since the market values and other factors upon which the projections are based will certainly change over the next 5 to 20 years. (And if you are planning to retire that soon then NONE of the proposals out there will affect you in any way.

3. It sounds like you are comparing dissimilar items anyway, and perhaps what you are calling a "pension" is some type of savings plan like a 401K for example. Pensions are usually defined benefit plans which would not vary to the extent you are describing. A 401K plan could see a substantial drop like you are describing if it is heavily invested in volatile equity funds, but again the value/balance of the plan accounts today is not a reliable predictor of what the balances and thus the monthly payout of the plan will be in 15 to 20 years.

Let me offer an evaluation of your "real-life" anecdotal example of private pensions versus social security as it relates to the debate over social security reform: In a discussion on strategies for ensuring a long-lasting marriage, somebody points to the hillary rodham and bill clinton marriage and concludes that serial philandering and procuring bl*wjobs from adoring sycophants with the assistance of government employees seems to improve the health of a marriage. The "experience" seems to support the notion, but it is far from evidence that the conclusion is a universal truth.

[Soul Seeker]

I don't even want to hear it. They do it right or they don't do it all. I praise the conservatives for holding firm. NO TAX Increases. Private Accounts. Fix solvency with responsible spending.

[VRWCmember]

look at how the market has been dropping recently. It's too volatile.

2 year history of DJIA:

10 year history of DJIA:

Notwithstanding occasional downturns in the short run, the long term growth trend is undeniable.

[ScreamingFist]

It is a PROJECTION, based on a lot of assumptions and based on plan balances and market values as of a certain date.

Exactly macaroona's point. If she goes to retire and her pension is worth zero because some radical muslim just dropped a nuke on Wallstreet, all this "put your money in the market for longterm growth" becomes a lot of hooey. I haven't seen anyone suggest that 10% of your assets should be in hard currency, like gold and silver, and in your safe, just in case of the above scenario.

[HostileTerritory]

I agree that it should be Sunnnunu\Ryan or nothing.

I don't know who that Ryan is, but he'd better not be from Illinois.

[NeoCaveman]

I don't know who that Ryan is, but he'd better not be from Illinois.

It's OK, he's from Wisconsin.

[HostileTerritory]

Do you have a chart from 1968 to 1982? It would tell a different story.

Many would claim that the big increase in the 1990s was a structural adjustment that reflected how undervalued stocks were for so long. We can't count on that to happen again.

Stocks have some risks. That's why the rewards are potentially higher than with bonds.

[VRWCmember]

If she goes to retire and her pension is worth zero because some radical muslim just dropped a nuke on Wallstreet, all this "put your money in the market for longterm growth" becomes a lot of hooey. I haven't seen anyone suggest that 10% of your assets should be in hard currency, like gold and silver, and in your safe, just in case of the above scenario.

Yes, and if some radical muslim dropped a nuke on Wallstreet, then the value of your pension is probably the least of your worries.

Gold and silver are not hard currency, they are commodities. And, in the case of the above scenario, you would probably be much better off with several guns and LOTS of ammo rather than gold and silver stuffed in your safe.

[ScreamingFist]

Yes, and if some radical muslim dropped a nuke on Wallstreet, then the value of your pension is probably the least of your worries. Gold and silver are not hard currency, they are commodities. And, in the case of the above scenario, you would probably be much better off with several guns and LOTS of ammo rather than gold and silver stuffed in your safe.

Won't argue either point as both are correct. And I have two safes......;)

[VRWCmember]

Do you have a chart from 1968 to 1982? It would tell a different story.

Here you go: Jan 1968 through Dec 1982.

Two major downturns coinciding with (1) the supply-side shocks of the OPEC actions from 73-75 (think "stagflation") and (2) the economic disaster that was known as the Jimmy Carter Era notwithstanding, there is still a definite growth trend in this same timeframe. If you were to consistently invest a small amount each month during this time period (such as a portion of one's FICA taxes for example), your investment would have realized substantial returns.

Now, how about another interesting time period -- Jan 1964 through Dec 2004:

As more and more of the middle-class become owner-investors through their 401k savings plans, the market will continue to be a growth engine.

[VRWCmember]

I think the only people who should invest in the stock market, whether for sheer income or a long term pension, are those who can afford the risk if they lose. I don't think that's most people.

That is the kind of thinking that keeps poor people poor and allows rich people to get richer.

[ex-snook]

How about chalking up failure to a bad solution to the SS shortfall problem?

[VRWCmember]

It sounds like you should consult with an investment counselor for your unique investment needs. Pensions are usually defined benefit plans based on a formula taking into account years of service, average salary, etc. and do not change from one year to the next (at least not more than rounding noise). You have shared some interesting anecdotal experience with us that, absent additional information as to what the numbers mean, nobody can really comment as to whether you are interpreting the data correctly or whether you work for an employer that is going the way of Enron.

The key to an appropriate investment strategy is to match your investment vehicle with your investment horizon. If you are retiring next year, then you should move most of your accumulated investment out of volatile equity markets and into something more stable. On the other hand, if your investment horizon is 10 to 15 years or more, then you need the power of compounding and growth to work for you. If you prefer to rely on the ponzei scheme known as social security, then enjoy your remaining years as a dependant of the government.