Tuesday, April 26, 2005

Was I Prescient, Or What?

Here is a post from March 18, in which I highlighted the Galveston County retirement program. Today President Bush was in Galveston (in Levy Hall at the University of Texas Medical Branch, where I was an Assistant Dean and on the faculty of Psychiatry) to talk about their rather unique and successful program.

No matter what Barbara Boxer or Harry Reid say (and I heard them say a lot about the "failure" of this plan)--it has brought a return of THREE TIMES what the individuals who opted for it would have received from social security. Check it out at the link above.

And here's a piece by John Tierney which discusses the successful retirement plan in Chile, of all places.

After comparing our relative payments to our pension systems (since salaries are higher in America, I had contributed more), we extrapolated what would have happened if I'd put my money into Pablo's mutual fund instead of the Social Security trust fund. We came up with three projections for my old age, each one offering a pension that, like Social Security's, would be indexed to compensate for inflation:

(1) Retire in 10 years, at age 62, with an annual pension of $55,000. That would be more than triple the $18,000 I can expect from Social Security at that age.

(2) Retire at age 65 with an annual pension of $70,000. That would be almost triple the $25,000 pension promised by Social Security starting a year later, at age 66.

(3)Retire at age 65 with an annual pension of $53,000 and a one-time cash payment of $223,000.

You may suspect that Pablo has prospered only because he's a sophisticated investor, but he simply put his money into one of the most popular mutual funds. He has more money in it than most Chileans because his salary is above average, but lower-paid workers who contributed to that fund for the same period of time would be in relatively good shape, too, because their projected pension would amount to more than 90 percent of their salaries.

By contrast, Social Security replaces less than 60 percent of your salary - and that's only if you were a low-income worker. Typical recipients get back less than half of their salaries.

Someone send an alert to Paul Krugman, who as usual, is without a clue.

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