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Reply #56: Here's how it could be worse: 2008 shows risks of privatizing Social Security [View All]

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antigop Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jan-15-09 11:12 AM
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56. Here's how it could be worse: 2008 shows risks of privatizing Social Security
Edited on Thu Jan-15-09 11:12 AM by antigop

If your year-end 401(k) statement made you feel like barfing, I have one consolation for you: it could be worse. How's that possible, given how horrible last year was for investors? Simple: If you're not close to retirement, you've got time to recover.

If you're in the retirement-age zone, as I am (I'm 64), at least you've got the option of hanging on until things get better. If you're in the mandatory-withdrawal part of life (more than 70 years old) or just need some retirement cash, you can take a minimal distribution this year and hope for the best.

If, however, you were forced to buy a lifetime annuity with your current balance - when you buy such an annuity, you trade your cash for a series of guaranteed payments for the rest of your life - you'd be making your loss permanent. That's how things could be worse.

That scenario is what could have happened to many people under President Bush's proposed Social Security privatization program. It would have required people of modest and very modest means who invested their Social Security taxes in the market to turn some or all of those accounts into annuities when they hit retirement age. (Yes, Bush never proposed a specific plan - but annuitizing private accounts for some people is what his 2001 Social Security privatization commission proposed.)

Alan Sloan, editor-at-large, is the author of the article.
Note to Alan: Alan, take a look around-- how many 64 year-olds do you see working at Fortune Magazine? While YOU may have the "option of hanging on until things get better", how many people have that option? How many older workers do you see at Fortune 500 companies?
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