Steely-eyed reporter John Drobnyk, the Morning Call's reporter in Washington, D.C., has posted his interview with Republican Senate candidate Pat Toomey (Pat Toomey Q&A, 4/15) over at Pennyslvania Avenue. One answer in particular struck me:
Do you still think it is a good idea to privatize social security?
Absolutely, it has always been a good idea. I disagree with the characterization of privatizing because that implies to many people somehow selling off the service or something. What is a very good idea is to allow young workers to take a portion of the money they would otherwise be sending to Washington and allowing them to invest that in a diversified portfolio.
The idea was always that that portfolio of investments that that person would actually own … would be required to be diversified across asset classes and across individual investments. And importantly it was always conceived that this was a portfolio that would modify over time and as a person approached their retirement age the portfolio would gradually shift its composition to one that would consist primarily, by the time a person got close to retirement, of very safe, very low-volatility investments such as treasury bonds, bank CDs and actual cash deposits and savings. …. If you had such a portfolio even in the last few years such a portfolio would have performed extremely well because treasury prices have gone up as interest rates have declined. …
I’m 47. When I entered the work force, the Dow Jones industrial average was about 800. Today we are all very, very disappointed with where it is … but it is well over 7,000. If a worker who started working 20 years ago had a chance to be investing gradually over these last years, that worker would have accumulated very substantial savings despite this downturn.
What bothers me is this phrase: "The idea was always that that portfolio of investments that that person would actually own … would be required to be diversified across asset classes and across individual investments." Required by whom? Who would go around checking people's retirement funds to see if they were sufficiently diversified?
In my retirement portfolio I have a Roth IRA through Vanguard that is geared for people who plan to retire around a certain year. It automatically shifts the investments as the targeted date gets closer. But I chose that (well, actually Mr. J did most of the research). There are a number of such funds available through a number of investment services. But the government doesn't come in and tell me what funds to use, nor do I want them to. Looking at the medicare part D pharmaceutical plan system, I would rather not see it, or any similar system, enacted for retirement funds. Social Security may be a little dull but people need a verifiable guaranteed form of retirement. Young workers, and those not so young, can certainly start tucking away a little each paycheck into other forms of retirement, but, speaking personally, I don't want my Social Security messed with.
Keep in mind, though, that this is not a subject I know a lot about.
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1 comment:
1 - your social security doesn't have to be messed with. The plans were always optional.
2 - diversification was to be done with a "chinese menu" - you have a limited number of options from which to chose
3 - privatization was always partial... fractional is more like it.
4 - how safe do you feel about government backing when we have unfunded entitlements as far as the eye can see, with new spending pushing the debt up in ways that make Bush look like a piker?
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