It's About Context...
In Part 1 of Why Are Social Security Investment Returns So Low?, we looked at how insurance companies work and why they are inherently conservative. Let’s continue by examining Social Security and its investment returns.
Now about those Social Security Investment Returns
In the previous blog Social Security: What is it? Insurance or Investment?, we determined that Social Security from its beginning was and is an insurance program that blends the personal needs of each participant with the collective needs of society.
Given that it operates like private insurance, the logical question is: “How does an insurance company work?”
In this two part blog, we will first answer that question. In part two, we will look at Social Security investment returns.
For over two decades, we’ve heard ongoing calls to transform Social Security from a government administered “group” program, where everyone who’s ever worked benefits, to an investment program of individual accounts, where you as the investor manage your own account.
You hear the arguments about how the stock returns have far outpaced those of U.S. treasuries and how an individual could be worth so much more. That may be true, but I assume there’s far more to it than your potentially receiving higher returns.
The question about handing medical expenses in retirement is coming up more frequently, even among my younger clients. They hear that the average lifetime retiree health-care costs is over $400,000 for insurance premiums, co-pays and other out-of-pocket costs.
One of the best ways to prepare to manage these expenses is to get healthy now. What do I mean?
A common water cooler topic and segment on the local news is the price of gasoline. Remember when we were paying $5.00 or more per gallon? Over the last year or so, you may have been overjoyed at paying closer to half of that amount at just over $2.50 or less per gallon. Even today’s $3.00 per gallon seems like a bargain.
With all the talk about gas prices, it seems reasonable to assume that when gas prices are high, people drive less and consume fewer gallons. And, likewise, when prices are lower, people drive more.