Tuesday, April 26, 2005
Jahn Tierney makes no sense: Here are the key lines from his Op-Ed that praises the Chilean private pension plan. Pablo is a Chilean friend of Tierney. (emp add) - ... our countries have required our employers to set aside roughly the same portion of our income, a little over 12 percent ...
- Pablo called up his account on his computer and studied the projected retirement options for him, which assume that he'll keep working until age 65 and that the fund will get an annual return of 5 percent ...
- After comparing our relative payments to our pension systems ... we extrapolated what would have happened if I'd put my money into Pablo's mutual fund instead of the Social Security trust fund.
- We came up with three projections for my old age ...
- Retire in 10 years, at age 62, with an annual pension of $55,000.
- Retire at age 65 with an annual pension of $70,000.
- Retire at age 65 with an annual pension of $53,000 and a one-time cash payment of $223,000.
- You may suspect that Pablo has prospered only because he's a sophisticated investor, but he simply put his money into one of the most popular mutual funds. He has more money in it than most Chileans because his salary is above average ...
- "I'm very happy with my account," he said to me after comparing our pensions.
COMMENTS: - Who cares about Pablo? All Tierney is doing is running a projection based on a guaranteed 5% return on investments
- Who cares about relative payments? It plays no role in Tierney's argument.
- Has Pablo prospered? We don't know. Tierney supplies no numbers. He merely asserts that Pablo has - up to this point in time.
- BIGGEST DECEPTION: We don't know Tierney's salary (past or present). So those attractive retirement amounts, based on contributions of 12% of an unknown income are meaningless.
- UNCLEARNESS AWARD: "He has more money in it than most Chileans because his salary is above average" - "most Chileans" means what? Chileans in the program? Chileans who have been in the program and contributed the maximum amount? Or just most Chileans - in or out of the program. Tierney doesn't say. And how does Pablo having an above average salary figure in this? How much above average?
The essay is a mess.
posted by Quiddity at 4/26/2005 01:38:00 AM
2 comments
you've probably seen this already. but in case others haven't. re the chile system, from a nyt piece :
Even many middle-class workers who contributed regularly are finding that their private accounts - burdened with hidden fees that may have soaked up as much as a third of their original investment - are failing to deliver as much in benefits as they would have received if they had stayed in the old system.
Dagoberto Sáez, for example, is a 66-year-old laboratory technician here who plans, because of a recent heart attack, to retire in March. He earns just under $950 a month; his pension fund has told him that his nearly 24 years of contributions will finance a 20-year annuity paying only $315 a month.
"Colleagues and friends with the same pay grade who stayed in the old system, people who work right alongside me," he said, "are retiring with pensions of almost $700 a month - good until they die. I have a salary that allows me to live with dignity, and all of a sudden I am going to be plunged into poverty, all because I made the mistake of believing the promises they made to us back in 1981."
http://www.globalaging.org/pension/us/socialsec/2005/chile.htm
uh, here is that url:
http://tinyurl.com/9tbyu
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