On Fri, Dec 17, 2004 at 03:48:13PM -0600, Dan Minette wrote: > As much as I think that privatization of Social Security paid for by > off the books debt is a bad idea,
A problem is that the liabilities of Social Security are partially "off the books" as it is -- the government has implicitly promised quite a bit more in benefits than can be delivered without raising payroll taxes. If the privatization brings those liabilities onto the books, as government treasury debt so that it shows up explicity (and hopefully forces the government to behave in a fiscally responsible way), then that by itself is a good thing. If privatization keeps Congress from "dipping into the trust fund" to pay for more unproductive spending, then it is a good thing. If privatization provides a back-door way to lower benefits paid in the future to those who don't really need them, then it is a good thing. None of it directly addresses the problem that America, as a nation, is consuming too much and investing too little, and that a big part of that is unproductive government spending inefficient healthcare. > I never really thought that something like this would happen. > It makes sense to limit it to the sort of options I have in my > 401k: We have a bond based income fund, an annuity type income fund, a Huh? "annuity type income fund"?? > S&P 500 index fund, a foreign investment fund and two different types > of growth funds. These flavors are fairly common, and aren't pump and > dump. > > If SS were privatized, limiting investments to fairly conservative > funds doesn't seem like a bad idea. IIRC, a general investment in an > S&P fund has outperformed most other funds over the last 10 years. That's the right general idea, but not general enough. It should be limited to very broad-based index funds. The S&P500 is only large companies and does not include REITs. The Wilshire 5000 would be a much better option. And the foreign offering should be based on as broad an index as possible -- the MSCI EAFE is not really broad enough, in my opinion. The bonds funds should also be index funds covering just about all types of bonds. There should be at least an intermediate term bond index fund, a very short term bond index fund, and a foreign bond index fund. Also, there should be "fund of funds" options with designated retirement dates. So, for example, a 2050 retirement fund would be something like 80%/20% stocks/bonds right now but would shift over time to about 10%/90% stocks/bonds in 2050. -- Erik Reuter http://www.erikreuter.net/ _______________________________________________ http://www.mccmedia.com/mailman/listinfo/brin-l
