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Feedom is another word for nothing left to lose. One orbit of the current Social Security debate revolves around the concept of increasing potential returns. But there is another factor that may be as profoundly influential or even more so: increasing fees. You didn't think Wall Street would let you set up your paltry $1,000 account for nothing, did you?

Let's use a "private" 401(k) account example as analogous to what might happen to a hypothetical Bush-league private account. From the US Department of Labor website:

Assume that you are an employee with 35 years until retirement and a current 401(k) account balance of $25,000. If returns on investments in your account over the next 35 years average 7 percent and fees and expenses reduce your average returns by 0.5 percent, your account balance will grow to $227,000 at retirement, even if there are no further contributions to your account. If fees and expenses are 1.5 percent, however, your account balance will grow to only $163,000. The 1 percent difference in fees and expenses would reduce your account balance at retirement by 28 percent.

Fees are how investment institutions make their money. As you might expect, fee schedules tend to follow one formula: the smaller the account, the higher the fees as a percentage of the account. Therefore, based on the Department of Labor example above, the more you fund your retirement using for-profit institutions, the more you lose.

Private account fees will be a stealth tax on your retirement savings — a tax on a tax, the fees coming out of the payroll taxes you will pay to fund the accounts, the same money that now funds Social Security. Republicans will end the so-called double taxation on unearned income (i.e., dividends) for the wealthiest Americans and simultaneously double-tax the retirement savings of the lower and middle classes.

Republicans will drown FDR's New Deal in the bathtub. Wall Street wins. You lose. Tough luck.

Incidentally, thinking about saving more and choosing your own investments for retirement is a legitimate concern for many Americans and should be considered by many more than do now. Fortunately, there is already something that functions in the same way that these ethereal private accounts are supposed to behave as promoted by Bush. They're called IRAs, and you don't have to wait for Republicans to pillage the US Treasury to take advantage of them.

Note to regular readers: No, I'm not coming back to regular posting. I may occasionally offer observations that are somewhat non-redundant with the rest of the blog universe every now and then. Yes, I'm still planning to leave the USA.

{ 10:20 AM }

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