Re: Feckless Pelosi

James Arthur wrote:

Way back in 1996 the Los Angeles Times ran an article in
which they figured that a 32-year-old (the writer's friend),
who had then $46,788 paid into Social Security, could expect
$610 monthly in benefits upon retiring at age 67.

That roughly translates to an assumed annual interest rate of 4% after tax. These calculations are very sensitive to the assumed rate of return for compound interest over many years.

If that same person took that same money and never added a
dime to it, invested it in dead-safe bonds, they'd get $2,498
each month on retirement 35 years later in /interest/, without
ever having to touch their principal.

This assumes an annual interest rate of 6.675% after tax - which seems a bit optimistic for dead-safe bonds. Junk bonds might manage it if you don't lose your shirt somewhere along the way.

The highest interest rate I spotted for truly safe US bonds today was a shade under 5% which gives a monthly figure of $1075. Certainly higher than the Social Security pension but not by quite such a large amount.

But people are foolish, they noted, and invest foolishly.

So do bankers remember LTCM, and Enron...

So they calculated if that same person took that same money
and never added a dime to it, lost two-thirds to foolish
investments, and invested the remaining 1/3rd in dead-safe
bonds, they'd still get $833 per month in /interest/ on
retirement--$233 / month more than Social Security--all
without touching their principal.

Only if they were able to get this magical safe investment bond that yields 6.7% every year for 35 years. And inflation may eat up the gains.

Regards,
Martin Brown

** Posted from http://www.teranews.com **
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