Zeev's Turnips Patch-No Politics (ZEEV)

[TJ Parker]

jeez, what's all the hooha about. smells like a dead fish to me: all the risk and none of the benefits. (and this doesn't even cover the required purchase of an annuity at retirement.)

The Plan

Participants Would Forfeit Part of Accounts' Profits

By Jonathan Weisman
Washington Post Staff Writer

Under the White House Social Security plan, retirees who opt to divert some of their payroll taxes into private accounts would ultimately get to keep only the investment returns that exceed the rate of return that the money would have accrued in the traditional system.

The mechanism, detailed by a senior administration official before President Bush's State of the Union address, would hold down the cost of Bush's plan to introduce private accounts to the Social Security system. But it could come as a surprise to those lawmakers and voters who have thought of these accounts as akin to an Individual Retirement Account or a 401(k) that they could use in its entirety upon retirement.

The plan is more complicated. Under the proposal, workers could invest up to 4 percent of their wages subject to Social Security taxation in a limited assortment of stock, bond and mixed-investment funds. But the government would keep and administer that money. Upon retirement, workers would then be given any money that exceeded inflation-adjusted gains over 3 percent.

That money would augment a guaranteed Social Security benefit that would be reduced by a still-undetermined amount from the currently promised benefit.

In effect, the accounts would work more like a loan from the government, which would have to be paid back upon retirement at an inflation-adjusted 3-percent interest rate, the interest the money would have earned if it had been invested in Treasury bonds, said Peter R. Orszag, a Social Security analyst at the Brookings Institution and former Clinton White House economist.

http://www.washingtonpost.com/wp-dyn/articles/A59136-2005Feb2.html