Personal Retirement Accounts should replace Entitlements

Well lets get straight into this R1: Personal Accounts Generate Higher Returns "Flaw 1: Gov't has lower risk, shares are known to be a higher return, higher risk instrument. " My opponent has failed to understand the point. All financial instruments have risks but some higher than others. For those that are higher risk one requires a higher return to risk investing. The Government pension pot and almost all private pension pots will contain a mixture of instruments so quoting a pure share return % is not a suitable Benchmark to compare returns. Secondly the government"s return is not 1.23%. This is just what they choose to pay out to you. The actual return a government receives on its investments, as conceded by my opponent, is actually higher than that which alone could achieve by yourself. (see round 2) "Flaw 2: . .. My point here is that though the average return may be 7%, as my opponent claims, the affect would be massively different for someone that joined in 1968, someone that joined in 1991 and, god forbid, someone that joined in 2007. " Again my opponent has missed the point. The average return rate looks great. HOWEVER when people join would have a massive impact on the value of their pot. An extreme example would be that someone who started investing in 2007 would up to now have lost money! i. e. currently be standing with negative return rates. It is not a fair or reasonable assumption to assume the next 30 years will be as rosy as the past 30. (If it were this simple then nobody in their right mind would have a bank savings account earning 2%. .. .. ) "Flaw 3: The return you receive from the Government is not the "true" return merely what they decide to payout to you. . .. The "excess" is used for other state operations. " I am accused of admitting that government steals our money"Well actually all money belongs to the government and all government belongs to the people so who is stealing from who"(good topic for another debate) What I was saying with this statement is that comparing S&P 500 returns with what you receive from the Government is not a meaningful comparison. In answer to your accusation that Government is stealing your money to use on other projects I have the following answer". .YES! !! ! And the whole point is if they didn"t take the cash from the social security pot it would be taken from elsewhere (increased taxes, reduced services etc) but one way or another you will pay for it. Now the reason it is better to have a state pension is that they achieve a higher return on the money than joe bloggs resulting in a net benefit. i. e. in total you have to pay less. R2: "Government Can Achieve a Higher Rate of Return" Sub1: Opponent conceded Sub2: Your logic is right. A gain somewhere must be a loss somewhere else. However in the case of state investments they often hold massive investments in foreign government bonds and other investment types. The result of this power (i. e. ability to demand higher returns for access to the big US cash pile) results in a net gain for the USA and a net loss for foreign countries. Hence why a state pension is preferable. Sub3: Opponent conceded albeit by his reckoning it is only a 1.414%. It is still a benefit Sub4: Social Security benefits are subject to political process and you vote in this political process. This means any decision to reduce pensions is one you have voted on. If you are not happy vote for a different party" R3: Improves the Economy "If gov't does try to get a higher return (if possible), it means much more taxation to get that kind of money" NO! !! !! The government is already doing this scheme using your social security contributions. It needs no additional funding. It is the current status quo. The government also does not need to pick business to invest in, it simply reduces company taxes benefiting the economy as a whole (Tax relief and Business Investment are 2 sides of the same coin). R4: Economic Freedom/ Tax Relief I believe is this section my opponent effectively concedes the debate. He advocates an "automatic enrollment" personal account. This is exactly what a state pension is. The only difference being that the individual would choose what investments he/she wants. As we have already shown that the government can achieve higher returns than individuals it is preferable for the Government to choose/manage the investments". .which means a state pension is preferable Conclusion I have shown that the state pension has a higher return/risk ratio than private accounts. I have shown that state pensions provide stability and a guaranteed minimum basic livable income once a person reaches retirement I have shown that if the government was not "skimming the top" of the pension pot for other projects they would be forced to raise taxes or cut services. (i. e. the only way to get a net win to achieve a higher rate of return from foreign countries) I have shown that personal accounts (even those based on historically stable and high growth shares such as the S&P 500) are not guaranteed and there is no market expectation that the next 30 years will be as successful as the last. I have shown my opponents comparisons of CAGR are incorrect and meritless.