A Great Retirement at Thirty Years Old - Happy Anniversary!

by Grant Davies

I'm not talking about anyone retiring at thirty even though I tried to hook you in with that headline. Instead I'm talking about the thirtieth anniversary of a social security system that actually works and (unlike the one we suffer with in the USA) will never go bankrupt.

I'm talking about a successful government system which is not a Ponzi scheme but a retirement savings plan that the people actually own and which has a rate of return which makes the US Social Insecurity system's (merely theoretical) return look pitiful by comparison.

This year, on May 1st, Chile celebrated the birth of it's privatized Social Security System. They were the first of some thirty other rational countries to "just say no" to government Ponzi schemes which were headed for default and say yes to a privately held, government regulated retirement system that has not only out-performed all expectations but befuddled the leftist naysayers who cannot stand the idea that any system that isn't administered by elite government central planners can succeed in aiding ordinary people in providing a great retirement for themselves.

According to an article in the Investors Business Daily on April 29th:

"In 2005, New York Times reporter John Tierney worked out his own Social Security contributions on the Chilean model and found that his privatized pension would have been $53,000 a year plus a one-time payout of $223,000. The same contributions paid into Social Security would have paid him $18,000."

The return on investment since inception for the Chilean system; "Over the last three decades these accounts have averaged annual returns of 9.23% above inflation. By contrast, U.S. Social Security pays a 1% to 2% (theoretical) return, and even less for new workers."

Of course as any even semi-informed citizen of this country knows, there is no Social Security Fund with any real assets in it for American people. The money has already been spent buying votes from the people who put the money in in the first place. The "Fund" is just an accounting device "account" full of government IOUs promising to print enough paper dollars to satisfy the claims of those who have paid in all their lives. (Until 2037 anyway, when even those Tooth Fairy promises also run dry.)

As part of the law the people in Chile actually own their own accounts as private property, just like your 401k or IRA accounts in this country.

In a world where American "progressives" are constantly comparing the US to other countries to see if they can find a way to denigrate our way of life, they forgot to compare us to the thirty-ish other countries who have come to their senses and left America in the dust on this one.

It's enough to make you wonder what the climate is like in Chile.

(Editor's Note: A retired investment advisor and resident of Illinois, Grant Davies blogs from a liberty perspective at What we Think and Why)


  1. What is the climate like in Chile? Great piece! I wrote about the president of Chile during the Chilean mine crisis at PJM last year:


  2. Isn't it truly outrageous to consider that nations like Chile are (in many ways) more free than we are? It is truly disgusting what progressives have done to this nation, truly disgusting.

  3. "U.S. Social Security pays a 1% to 2% (theoretical) return"

    Who do I call to fire this really crappy investment advisor?

    "Because the Only Good Progressive is a Failed Progressive"

  4. Hey! A plan that works! We cant have any of that, can we now?
    Funny thing how SS is now part of the 'budget'... I thought it was a fund...
    My point is that it is listed as "spending". The Govt doesn't spend money that belongs to a trust...

  5. This is really good information. Like anyone under forty that sees ever larger portions of my check going into this mass theft, I would love to see it privatized.

  6. shoot, if this Chilean model was being used, that business I would like to open I would have the assets to set up(and quite a sum left over). Now, I have poop for currency with the hope and change. Talk about a job killer. How many would like to become independent in creating their own work, but can't because, as stated in another blog, when you work yourself to death just to make ends meet, you have nothing left over to invest? What a waste of my earnings!

  7. Curious that the John Tierney (NYT reporter )comparison was made in 2005, before the meltdown of private markets and pension funds and the severe diminution of equity performance and interest rates. And he doesn't mention that the Chilean pension system is backstopped by government, which promises to 'make up the difference' if a pension fund goes bankrupt or has a shortfall. Why...it's almost like a government insured fund, which isn't even mentioned in this one sided piece. And he's using outdated statistics and selective quotes to make the point. And he uses a single data point besides!

    Good show! Another apt demonstration that you can make almost any argument you want and have people fall for it.

  8. @Rick,
    I don't think anyone has to "fall" for anything when it comes to comparing the Chilean system to the Ponzi scheme of the USA.

    The piece is a short reminder of the success of that system, not an in depth tome which explains all the details of both systems.

    I assume you read the accompanying article which is linked to in the piece, where you will find a more detailed but not exhaustive study of the success.

    I assume you are ready to make an argument that claims the the US system is superior to the Chilean system so that everyone can "fall for it?"

    I would be happy to engage you in a discussion at length on that argument if you choose to make it.

    As to the equity performance of the investments in the average Chilean account since 2005, you may want to look that up before making assumptions on the performance of them.

    In any case, thanks for commenting.

  9. @Rick: The problem with SS has to do more with the fact that it is inherently 'the same' basic structure as it was when set up in 1935.

    That is like being to drive your great grandpa's Packard despite the fact that it gets 5 mph and goes to 60 in 15 seconds flat.

    The US SS system sadly needs a modernization effort along the lines of Chile. Chile's workers have a chance to build real wealth and pass it on to their heirs unlike in America through their SS system where if you die 1 second before midnight before you turn 66, you know what you and your family gets from US SS?

    Bupkis...Nothing. Squadooshy.

    And you are proud of that and think the US system is far superior to that?

    Unfortunately, you are wrong on that score.


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