Re: Hillary Catches Yet Another Republican lying

cliff84373_at_yahoo.co.uk
Date: 03/18/05 

Date: 18 Mar 2005 00:57:16 -0800

> >
> > The "40%" figure you mention is interesting since it raises the
> > question of how much extra participants could make with personal
> > accounts. Experts expect that private accounts would yield a real
> > return of about 4.5% with a 50/50 mixture of stocks and bonds after
> > paying administrative fees.
>
> What experts? A 50/50 mix should bring back 11.5-ish at an 8%
standard
> deviation, and administrative fees ought to be less than .1% on
accounts
> of this size. Also, I'd say that a 50/50 mix is WAY too agressive for

> accounts that serve a social purpose like this, but still high enough
to
> pay for your "clawback."
>
> I'd want to know what administrative fees they're assuming......
>
> Mike

In regard to future rate of return for equities, the best source I've
found is at:

http://www.ssab.gov/NEW/Publications/Financing/estimated%20rate%20of%20return.pdf

Here's a quote from that source:

"My own estimate for the long-run real return to equities looking
forward is 6 to 6.5 percent.I come to that using roughly the parameters
chosen above. If the P-E ratio fluctuates around 20, the cash payouts
to shareholders should range from 3 to 3.5 percent. I am relatively
optimistic about the possible steady-state growth rate of GDP and would
choose 3 percent for that number.5

That leads me to my 6 to 6.5 percent real rate of return range. While
this is the range that I would choose as the expected return to
equities, it does not indicate the degree of uncertainty about actual
outcomes over the next 50-75 years. I think there is a great deal of
uncertainty about long-run equity returns. A range of outcomes as wide
as 2.0 to 10.0 percent would not strike me as unreasonable. Even this
wide range of possible outcomes indicates that the 9.7 percent real
return that stocks actually earned over the 1926-2000 period is quite
unlikely to be repeated."
(Pages 50-51)

I have a niece who has $35000 in cash from a profit sharing plan from a
previous job who is asking me for investment advice. Part of the advice
I gave her was that she could probably expect about a 6% return from
equities, but there are no guarantees. It's one thing to claim on the
usenet that the stock market is likely to yield 6.5 to 10% returns, but
it's another thing to tell a relative that you're fond of that she can
expect those kind of numbers.

As I recall, Bush's commission on Social Security reform, the "CSSS",
uses the 6.5% figure. Their report is at:

http://www.commtostrengthensocsec.gov/reports/Final_report.pdf

The CBO uses a 6.8% figure for equities. Their report is at:

http://www.cbo.gov/showdoc.cfm?index=5666&sequence=0
http://www.cbo.gov/ftpdoc.cfm?index=5666&type=1

In their report the CBO assumes diversification for a typical Social
Security investor as follows:

Treasury bonds, 20%, return 3.3%
Corporate bonds, 30%, return 3.8%
Equities, 50%, return 6.8%

The CBO assumes administrative costs of 0.3% with a centrally
administered system patterned after the government employees TSP
system. The 0.3% figure is interesting since the TSP program, as I
recall, only has a cost of about 0.1%. On the otherhand, I read an
article somewhere saying that given the huge numbers of very small
accounts, the administrative costs would be significantly greater than
0.3%. In any case the 0.3% figure appears to be the one everyone is
using.

Another interesting aspect of Bush's plan is that Bush supports a
centralized government administrative system for the personal accounts.
Under this type of a system the government administrative board would
have voting rights for all of the accounts. This approach is one that
many conservatives have claimed is unacceptable in the past and it goes
counter to recommendations of the CSSS report. From the point of view
of a Democrat, my question is why don't we simply allow the Social
Security Administration to invest in equities if you're willing to
accept the premise of a centrally administered system anyway?

Relevant Pages

  • Re[2]: Messenger service abuse (from inside the network)
    ... Hello Shawn et al. ... just a playground to learn some administration ... Messenger service abuse ... SJ> maintain 300+ user accounts, as most of them use the PCs for short ...
    (Security-Basics)
  • Re: Administrator accounts
    ... Accounts used for purely administrative purposes do not require CALs. ... I had it in my mind somhow that you were allowed 2 distinct 'admin' user ... accounts for purely administration duties like patching etc. ...
    (microsoft.public.windows.server.sbs)
  • Re: Script help
    ... Network administration is always a ... > shared on a server somewhere on campus, then yes, individual accounts are ... >> those trying to save files on workstations. ...
    (microsoft.public.windows.server.scripting)
  • Re: Administrator accounts
    ... I had it in my mind somhow that you were allowed 2 distinct 'admin' user ... accounts for purely administration duties like patching etc. ...
    (microsoft.public.windows.server.sbs)