Among all the other lies in Bush’s speech I see one that has not been widely explained. This is the lie that people would build up money in the private account that they can keep and pass on to heirs.
Bush said, “…you can build a nest egg for your own future,” and “…you’ll be able to pass along the money that accumulates in your personal account, if you wish, to your children or grandchildren.”
So you have this account (if the stock market hasn’t gone down), and you’re supposed to live off of it until you die. Question for you: How much should you take out each month? Remember, if you take out too much you will run out of money and have nothing to live on.
The way a situation like this is usually handled is you use the money to buy an annuity — a guaranteed monthly amount paid to you each month until you die. The amount is figured by calculating the average life expectancy of someone your age. It works because half of the people die early, leaving enough money to continue paying the other half of the people who die late. If you buy an annuity and die a month later, your money goes to cover the person who lives to be 112.
And, of course, the company you buy the annuity from keeps a healthy commission. (They gots to pay their CEO his $200 million each year.)
So this “pass along the money” idea is just another lie — words that sound nice and are used to trick you into thinking this is a good deal. It is a lie because you have to give the money to an annuity company or risk having nothing left to live on. And it’s worse than you think. The lifespan calculations that decide the annuity payments are calculated by professionals who do this and only this and know what they are doing. The Bush plan leaves everyone on their own to figure out for themselves how much to take out each month. This means that it is possible for every person to miscalculate and run out of money.