Quote:
Originally posted by Mmmm, Burger (C.J.)
And, btw, go do a compouding calculator and see the difference between a 2% and 4% return over 40 years. It's a pretty big nut by the time you're done.
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Using the rule of 72 as a guide, 2% return means your money will double in 36 years, then grow a bit more by year 40. 4% means it will double in 18 years, redouble at 36, and grow a bit more by year 40.
So the 5k you put away in Year 1 goes to around 11k, or to around 24k. The difference is substantial.
Unfortunately, you can't assume steady growth in the stock market. We've all heard how stocks outperform -- but that is historically, over time, past performance that does not guarantee future results, yadda yadda yadda. If Year 40 in this scenario is comparable to, say, 2001... ouch. Or 1987 -- you don't have to use the "Depression/1929" scenario for it to be scary.
Moreover, no one that I know of has done a study of stock market returns in years following big in-flows. I would think, though I don't know all the numbers, that any PRA program worth the effort would result in a pretty substantial inflow, one large enough to puff up share prices. And that creates a dangerous situation -- the investor who gets in during a run-up is always the most vulnerable.
People who have substantial amounts in the market already will benefit from the run-up. People who depend on SS, supposedly the ones this program is supposed to help, will be the most vulnerable and may ultimately be screwed.
