Where are the folks who assured me and others we didn't know what we were talking about

[pat_k]

10. The notion that "child accounts will earn so much they'll replace social security" is insane.

Yes. They are absolutely hellbent on dismantling SS. I have no doubt they have all sorts of plans. But they are in fantasyland if they imagine these child accounts will somehow do the trick. It's nuts.

What the hell are they thinking? They somehow imagine that every new parent has $5000 laying around to add to the $1000?

Looking at the numbers, 28%-34% of American's between 18 and 44 have NO emergency savings. Another 31% to 37% have between 0 and three months of expenses (see chart). So, for a vast majority of these accounts, the $1000 will be it. And, even if invested "wisely" you can bet it would be withdrawn long before retirement.

But, let's play the fantasy "child accounts will earn so much they'll replace social security" game for a minute.

So, they deposit $1000. And they assume all parents magically have the wherewithal to deposit $5000. So, in their dreams, every kids starts with $6000 in their child savings account. Running the numbers without inflation (another fantasy given that investments that outpace inflation are far from "sure things," but we'll ignore that too), that $6000 would need to earn about 7% in compound interest annually to yield a balance of $558,295 in 67 years. That amount sounds to me like a modest SUPPLEMENT to social security, not a replacement.

Given that there is absolutely no long term investment that would guarantee 7% in compound interest, that fantasy scenario is not likely to materialize for any meaningful number of these these babies/future retirees.

To be a bit more in the real world, the kid could buy into a bond fund and reinvest earnings. Assuming today's 30 year rate of about 5% and a variance of plus or minus 2%, your balance in 67 years would be $157,700.

Nothing wrong with starting young and having some money earning money, but no way in hell is that a replacement for SS. It's hardly even a decent supplement.

Of course, the reality is that less than half -- perhaps a lot less than half -- of parents are likely to have the wherewithal to make that initial investment. Sounds to me like something they can pull out later to blame poor people for being poor. (We gave you a chance to make a bunch of money, but you blew it!)