Monday, July 14, 2014

Chile and 30 Other Countries Run Their Social Security System Better than US

Republicans Steve Forbes in 1996 and George Bush in the 2000 presidential campaign advocated for allowing workers to put their Social Security money in private accounts with more choice in how to invest that money.   Al Gore, repeating Democratic 'talking points,' called it a "risky scheme.'  Climate alarmist Al Gore was another "Mr. Wrong" like our current 'misstra know-it-all' Obama.  Both are idiots.  It is those guys who are members of the flat earth society.

Fortunately, Chile and 30 other countries didn't listen to Al Gore and those countries and citizens are enjoying much more robust retirement programs that provide retirees MUCH higher retirement income with no deficits to burden taxpayers.  Chile and 30 countries privatized pension contributions and now are enjoying investment performance that outperform our system by far.   From IBD,
The study of 28,000 households done by a consultancy affiliated with the Catholic University of Chile, showed that male workers who contributed just 10% of their salaries to their retirements for 40 years or more on average earned retirement checks worth about 87% of their top salaries. No 401(k) account needed.
That's because in 1981 Chile Labor Minister Jose Pinera replaced the country's bankrupt social security system with this famous system of private accounts.   It redirected workers' existing social security taxes to a new market-based system of investing choices that let workers make their own decisions in a program run by private companies.
The study shows Chile's private pensions over three decades have yielded returns six times higher than what workers got under Chile's old social security system — which, by the way, was similar to ours.
In contrast, US social security returns are paltry compared to the amount paid in. Chileans get 6 times the amount of retirement income compared to a system similar to ours. Also, in Chile, the chart below shows that most of the payout of benefits come from investment returns on investments -- not contributions. Even when the market turns down, the pension fund continues to buy investments and, in effect, dollar-cost averages their investment purchases. Notice how the huge financial crisis in 2008/2009 was a temporary blip in profits.

But don't expect anything good to happen in the U.S.   Democrats are against all market-based solutions and demagogue the issue by falsely warning that markets are far too dangerous to entrust workers' pensions to them.   As usual, these people are wrong. These are the same people who assured lied to you that ObamaCare would improve your lives.  

These people refuse to acknowledge the power of markets.  Although it's been known for 30 years, Democrats put their heads in the sand and refuse to even acknowledge the reality that there are fewer workers for each beneficiary now and into the future for both SS and Medicare.  Both programs are sharply in deficit forever. 

It's the Democrats that are putting people's retirement security at risk.  Because there is no "lock box" for SS or Medicare, (those monies were spent years ago by your corrupt politicians) these benefits are paid out of current tax revenue.  What happens when there is a future financial crisis and the US Government can't raise money in bond markets (after racking up staggering amounts of debt causing the country's credit rating to collapse)?   Benefits will be paid, but a cup of coffee might cost $500 since the gov't will surely inflate their way out of their own mess.

Citizens in Chile have no such worry.

Stock markets don't go to zero and, in fact, are the ultimate inflation hedge since companies earnings increase with inflation.  Yeah, share prices might go down for awhile, but eventually rise given a long enough time frame.  Privatizing Social Security is threatening to Democrats because it makes the government mostly irrelevant.   That is the Democrats worse fear. 

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