Social Security Privatization and Bad Times
Publius snarks, “It’s too bad we didn’t invest one-third of the Social Security system in the market.”
Indeed it is. To be sure, we’d have “lost” money if we had done so in early 2005 and taken all of it out this morning. Then again, we’d have lost money anyway since, in lieu of investing it in stocks, we’re simply spending it and writing IOU’s.
Moreover, retirement savings is a long-term, large scale enterprise that reaps the benefits of compound interest and dollar cost averaging. During periods when the market is in decline, as it is now, one’s investment buys more shares of stock. During periods when the market is growing, as it has for most of the past thirty years, one earns dividends which are reinvested. Either way, there are no legal ways of which I’m aware to make more money over a long period of time.