CLICK FOR TODAY'S CARTOONS

Monday, July 11, 2005

SSI and The Time Value of Money

 One of the joys of college teaching always obtained from my course, “Introduction to Computers”, where I taught freshmen how to develop spreadsheets using VisiCalc, then Lotus 1-2-3, and then Excel. I would tell them that they had a unique advantage, their youth, and show them the time value of money by developing a spreadsheet into which they could insert various investment amounts, interest rates and time periods.

I went back to one of those old spreadsheets the other day and found the following results. If you invest $1500 per year for 35 years (the average worklife) at 3% (the best return earned by present practices with Social Security), you end up with $93,414. If you invest at 7% (the average return on the US stock market for the past 100 years), you end up with $221,870. If you invest at 10% (the most prevalent average for various periods), you end up with $447,190. This assumes annual compounding, which is the worst case assumption you can make.

Here lies the heart of the argument in favor of putting some portion of Social Security taxes into tightly regulated individual or private accounts. Since I know that Social Security is going into the red sometime between 2018 and 2042 (depending on who is doing the forecasting and what assumptions are being made), I want something done now beyond just raising taxes, cutting benefits and/or raising the retirement age – some combination of which is necessary no matter what else we do. I want something done now for the sake of my children, my grandchildren and their children.

Those who say that this involves unacceptable risk simply do not know what they are talking about. If you take any 35 year period and average the stock market returns, the lowest figure you get is 3%, so the worst case of the stock market equals what Social Security earns now. There has to be another agenda at work here to discourage private accounts. Either that, or they have no confidence in the future of this country.

There is one valid argument against private accounts; it will require large amounts to be borrowed by the US government to finance the changeover, since tax receipts will not be enough to cover current expenditures, earlier than forecast. I liken this problem to the couple who continues to rent as they save enough to purchase a home without a mortgage. How foolish this is with rent payments going nowheres and housing prices rising by leaps and bounds. Russ

AddThis Social Bookmark Button

3 Comments:

At 12:11 AM, Anonymous Anonymous said...

Good day !.
You re, I guess , perhaps very interested to know how one can reach 2000 per day of income .
There is no need to invest much at first. You may start to get income with as small sum of money as 20-100 dollars.

AimTrust is what you haven`t ever dreamt of such a chance to become rich
AimTrust incorporates an offshore structure with advanced asset management technologies in production and delivery of pipes for oil and gas.

It is based in Panama with offices everywhere: In USA, Canada, Cyprus.
Do you want to become an affluent person?
That`s your chance That`s what you really need!

I feel good, I started to get real money with the help of this company,
and I invite you to do the same. It`s all about how to select a proper companion who uses your funds in a right way - that`s it!.
I take now up to 2G every day, and my first deposit was 1 grand only!
It`s easy to join , just click this link http://itoqigafu.lookseekpages.com/jiwinu.html
and lucky you`re! Let`s take our chance together to get rid of nastiness of the life

 
At 1:54 AM, Anonymous Anonymous said...

Hello !.
You may , probably curious to know how one can manage to receive high yields .
There is no initial capital needed You may commense earning with as small sum of money as 20-100 dollars.

AimTrust is what you thought of all the time
AimTrust incorporates an offshore structure with advanced asset management technologies in production and delivery of pipes for oil and gas.

Its head office is in Panama with structures everywhere: In USA, Canada, Cyprus.
Do you want to become a happy investor?
That`s your choice That`s what you desire!

I`m happy and lucky, I started to get real money with the help of this company,
and I invite you to do the same. It`s all about how to select a proper partner who uses your money in a right way - that`s AimTrust!.
I take now up to 2G every day, and what I started with was a funny sum of 500 bucks!
It`s easy to join , just click this link http://nilyhadif.wtcsites.com/vowylym.html
and go! Let`s take our chance together to get rid of nastiness of the life

 
At 12:05 PM, Anonymous Anonymous said...

Good day, sun shines!
There have were times of hardship when I felt unhappy missing knowledge about opportunities of getting high yields on investments. I was a dump and downright stupid person.
I have never imagined that there weren't any need in big initial investment.
Nowadays, I feel good, I begin to get real income.
It's all about how to select a proper companion who utilizes your funds in a right way - that is incorporate it in real deals, parts and divides the income with me.

You can ask, if there are such firms? I have to answer the truth, YES, there are. Please be informed of one of them:
http://theinvestblog.com [url=http://theinvestblog.com]Online Investment Blog[/url]

 

Post a Comment

<< Home