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February 05, 2005

So Social Security is a Great Deal

For years we've been told the investment returns of having our money in social security were terrible. But Bush's plan makes clear what a great investment social security really is. Looking over Bush's proposed plans, the chief actuary of the Social Security system has argued:

To be better off than retirees who had stayed with the guaranteed benefits, an investor's private account would have had to earn more than three percentage points above the rate of inflation.

So social security gives retirees a guaranteed return with no downside risk quite favorable to many other investments. Returns in the stock market might be better -- but they could be far worse. The point is that all the hype about the "terrible returns" on having your money in social security were lies, since individual social security returns are just about equivalent to investing your funds in safe inflation-adjusted treasury bonds (which have yielded about 7% returns since introduced.)

Posted by Nathan at February 5, 2005 05:07 AM