NCPA - National Center for Policy Analysis

Slumping Market No Reason To Postpone Social Security Privatization

April 23, 2001

Advocates of maintaining the Social Security status quo have seized on the recent tumble in stock prices to fight privatization of the system. But that argument won't wash, financial analysts say.

They point out that people live longer than bear markets.

  • Wharton business school professor Jeremy Siegel reports that average annual equity returns for every 50-year period since 1802 averaged 8.1 percent.
  • The best 50-year return on record saw a 13.1 percent gain on average each year -- while the worst period returned 8.1 percent annually.
  • Real after-inflation annual returns in the three categories were 6.8 percent for the moderate period, with highs and lows of 9.3 percent and 4.4 percent respectively.
  • The lowest 50-year annualized real return -- 4.4 percent -- is 300 percent to 400 percent greater than the rate of return today's young workers can expect to receive from Social Security.

Source: Wade Dokken (American Skandia Inc.), "Social Insecurity: In Spite of Slump, Privatization Plan Should Go Forward," Investor's Business Daily, April 23, 2001.


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