Tewell Tyme Newsletter Volume 2, Issue I

No Laughing Matter

OK. Everyone knows time is money. Except in Washington D.C. of course -- where reality is regularly stood on its head. There, if time is money, you go through a billion dollars before lunch. [That's billion with a "B" -- a capital "B" no less.]

If you have the time, sneak a peak at Washington D.C. At their rates, that's more than most of us can afford. The things that go on in that town are so funny it makes you want to cry . . . and cry real tears because they're usually doing whatever it is they're doing with our money.

Take Social Security. If you will, if you can, if you must! One of the most scared of all of Washington's sacred cows. Unfortunately, the pro-gram has enough holes it that this is a sacred cow that could produce its own Swiss cheese. Given the Federal government's proven ability to mishandle money, the ever-resourceful editors of The Wall Street Journal, decided to play an expensive game of "what if " with Social Security using a divide and conquer strategy.

They created a typical 25-year old man (if there is such an animal) who joins the workforce today and works for the next 40 years. The Journal's game begins with:

What if, our specimen miraculously was not bound by today 's Social Security law, and only his employer's contribution actually went into the Social Security' trust fund;

What if, our friend commits the ultimate heresy and tries to control his own life and money, and the contribution that he would be paying through pay roll deduction is, instead, invested in a personal stock fund;

What if, this mythical personal stock fund has the audacity to grow at 10% annually -- well below the average return on stocks for the past several decades.

Given this scenario, our young friend's retirement funds (federal and private) are growing side-by-side. Come retirement time, who will have done a better job at managing his money? The Social Security Administration, or Wall Street? A no-brainer, you say? Sure that's the easy part . Picking the winner may be easy, but what about the point spread? Yeah, yeah, you're right. The stock fund does win. But the clincher is a dollar spread that could stretch from Westport, Connecticut to Santa Clara, California -- with enough slack for a stop at Wichita in between . Or, in Washingtonian terms, almost enough to get you from breakfast to your first coffee break. According to the Journal, in 1995 dollars, our young friend would receive $954 per month from Social Security -- based solely on his employer's contributions. Based on the Journal's math, the other half of the "payroll tax" that was invested in his (under-performing) personal stock fund (which was equal to the amount "invested " with Social Security) will provide a monthly payout of $5,864.

That's a difference of 510% -- or $4,910 -- per month. Each and every month. Twelve months a year.

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