And it usually takes time to rebound from a steep decline. Stocks did not regain their 1929 highs until 1954, and it took almost ten years for the market to match its 1973 high point. Similarly, not everyone earns the market average-some do better, others do worse. The notion that individual accounts can generate returns high enough to ensure adequate retirement income is based on future economic predictions much rosier than those used to forecast Social Security's long-term solvency. If the economy grows at the rate privatization proposals assume, Social Security would have more than enough revenue to fund all of its benefit obligations indefinitely.
Individual accounts are expensive to administer.
Administrative costs will be applied to every account. These costs include investment management fees, brokerage commissions, recordkeeping fees and various transaction costs plus profit margins for all of the private companies involved. These costs reduce an individual's investment returns considerably. Fact Copyright 2000 Leadership Council of Aging Organizations. All Rights Reserved.