Real Dollar Direction of Private Accounts

The NYTimes has published a competent article on Private Accounts, and what they will mean to yearly Social Security benefits for concerned Age groups based upon Year of retirement. The Center which did the Study estimates it will take a 4.6% yearly return on Private Account portfolios to generate replacement of currently scheduled benefits to Workers. The article itself stated the Center and article did not approve or disapprove of Private Accounts in commentary.

The Author decided he must contribute:

1) Workers must rely on Portfolios maintaining an average yearly gain of 4.6% on Investments, or they will not receive what they are promised now.
2) Workers must rely on Portfolios maintaining an average yearly gain of 6.7% on Investments, to receive a 5% gain on currently guaranteed benefits.
3) The Author estimates there is 57% chance of maintaining a 4.6% gain on Investments, and only a 17% chance of achieving a 6.7% average yearly gain on Investments.
4) What Stock Market values are upon Retirement make a vital difference. The Private Accounts may have achieved a 6.7% average gain on Investments, but if one retired during an economic downturn; his retirement might be based upon a negative gain on Investments in the Private Accounts--losing Benefits drastically.
5) The Stock Market gained is estimated to inflate by 15% of current value by 2012 with introduction of Private Accounts in 2009, but such inflation in Stock pricing will be estimated to disapate by 2016-18. Current Holders of Stocks can be expected to make a 15% Return above their yearly average Gains, if they switch their current Stock holdings to Bonds or Treasuries within the Period 2012-2016. Translated to Private Accounts' allowed investment rates and total Sums invested, it means current Holders of Stock selling under these conditions will be assured of 280% chance of 4.6% average gain and 130% of 6.7% gain in their Portfolios by equal date of retirement, if their current holdings equal the total amounts allowed to be transferred to Private Accounts.

The major incentive of Private Accounts remains the Gains expected by those currently invested within the Market, or who make a Living by managing Funds or trading Stocks and Bonds. lgl