Not a Shy, Retiring Plan
Mutual Funds (08/00) Vol. 6, No. 10 p.79; McReynolds, Rebecca

With Social Security income facing a number of restructuring proposals these days, planning for the future can be difficult. In the middle of this debate is a proposal supported by Republican presidential hopeful and Texas Gov. George W. Bush. The proposal, Senate bill 2313, would redirect approximately 15 percent of the 12.4 percent currently collected in social security taxes from workers and employers and put it into private retirement accounts (PRAs). The money would be invested in stocks, bonds, or both, earning market-rate returns throughout the employee's career, until retirement. The proposal would extend the retirement age to 70. It would also allow for workers to make voluntary additional deposits into their PRAs. The problem with this system is that there is no security in it. A bear market could drastically affect one group of workers on stride to hit retirement, while a bull market could create riches for the next group of retirees. While the proposal promises a safety net for such situations, to plan for one's retirement would still require a lot of guess work. There are several other questions about the proposal as well, including whether it would really shore up the Social Security Trust Fund, how to avoid fees and expenses from eating up returns, and how to prevent retirees from betting on risky investments.


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