Can Financial Assets Beat Social Security?
Not in the Real World. In the first paper, I pose the question, “Can financial assets beat Social Security?” And the conclusion is, “Not in the real world.” We all know that the stock market is a volatile place, even ignoring the Great Depression. The past 25 years have included 12-month periods in which the real value of stocks dropped as much as 40% (1974), and rose as much as 50% (1983). But the “privatizers” assume that over any longer periods — one or two decades — the return on financial assets dependably approximates its long-term average. This shows a remarkable lack of familiarity with the behavior of the financial markets. The typical family has an average of about 20 years to save for retirement. (Someone who begins saving at age 25, saves an equal amount each year for 40 years, and retires at age 65, will earn, a return on those savings for an average of 20 years. For most families, the saving is bunched between the ages of 45 and 65, which shortens the average; but part
