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Revamp Social Security? Just Tweak 401(k)s And IRAs


Now 32, I am worried about the solvency of Social Security. But it seems to me that we already offer similar retirement privatization programs: 401(k)s and individual retirement accounts ("The Bush factor," Where to Invest, Dec. 27-Jan. 3). While they are not mandatory, aren't they more in line with Bush's "Ownership Society" thinking? After all, you can choose how much to contribute, and you have thousands of options to invest in, vs. the few that may be offered should Bush's privatization plan become law. Wouldn't it make more sense to modify Social Security benefits and gradually raise the retirement age in conjunction with more 401(k) and IRA perks and incentives? Additional changes might allow early-withdrawal options for 401(k)s and IRAs to offset any increase in the minimum retirement age for Social Security.

In this way, Social Security remains a viable option with limited market risk for retirees, yet people are encouraged to take control of their own financial future through increased private investment.

Jim Witkins

Madison, Wis.

No doubt there is an opportunity for investing in Brazil, Russia, India, and China (the BRICs). But you fail to mention the importance of property rights in stimulating private investment ("Four countries you must own," Where to Invest, Dec. 27-Jan. 3). In fact, weak property-rights legislation is a common risk in these nations. In addition, it is important to highlight that these "developing nations" are in different stages of development. Compared with Russia, India, and China, Brazil is already in an advanced stage. Brazil has successfully made the transition from the military rule and hyperinflation of the 1980s. But high nominal and real interest rates are still an obstacle to be overcome. The BRICs should be treated like the individual entities they are when it comes time to invest.

Jo?o Coelho

Urbana, Ill.

With all the expertise gathered in BusinessWeek, no two alleged experts or selection methods suggest the same stock. Why not throw darts? But congratulations on having a sense of humor. In "How to invest like Harvard" (Where to Invest, Dec. 27-Jan 3), CEO Jack R. Meyer of Harvard Management Co. flat out tells readers not to invest like Harvard. He suggests index funds. Harvard's single largest investment turns out to be timber, which it holds directly, avoiding messy commissions and commodity markets.

Perry Glasser

Haverhill, Mass.

In the interview with Harvard's Jack Meyer ("Husbanding that $27 billion"), I liked his comment: "The investment business is a giant scam: It deletes billions of dollars every year in transaction costs and fees." I invested for 20 years with a large firm, and the original guard had ethics, in my opinion. Then they retired, and a younger group came in. All they wanted was trade, trade, trade. It was easy to tell they had no interest in my welfare. I eventually sold every stock and exited the investment field. I believe for the small guy that it is a scam and that big investors manipulate the market.

Sheldon Ralston

Stratford, Wash.

It seems misleading to add "home value" to the graph showing household net worth that accompanies "Consumers are piling on the presents" (Business Outlook, Dec. 27-Jan. 3). Traditional measures of one's personal net worth exclude equity in a primary residence for good reason: You can't use the money unless you're prepared to sell your house.

Places such as Orlando are having a truly "exuberant" bubble, where houses are bought and sold several times before construction is even complete. Fueled by such devices as "interest only" or even negative amortization variable-interest loans with low teaser rates, an interest rate increase could send prices tumbling. It would be wrong to say that someone who has been living in his own Orlando-area home has made or lost any money as the bubble runs its cycle.

Robert Swirsky

Lake Buena Vista, Fla.

The illustrious Alfred E. Neuman no doubt has enough problems with the education Establishment without BusinessWeek's adding fuel to the fire. Mr. Neuman does not say: "What me, worry?" It's: "What, me worry?"

Peter Skurkiss

Stow, Ohio

In "A new Sino-American economy," the U.S. could find itself undergoing the Canadian experience of "living next to an elephant" ("The China price," Special Report, Dec. 6, and "How America can meet 'the China price,"' Editorials, Dec. 6). In our trade relationship, the U.S. is the dominant partner. It can and does dictate terms (softwood, beef, pork, wheat, steel, etc.). Still, Canada has been lucky. Although we have our differences -- Iraq, the U.N., multilateralism, the role of government, health care, etc. -- we share history, language, and culture. We are kinfolk. Natural partners. We got rich together.

That won't be the case in a Sino-American economy. Elephantine U.S. trade deficits suggest that China is already dominating the relationship, and America is in danger of becoming the junior partner. Worse, a Sino-American economy would be a partnership of strangers. China would be an unsympathetic, even hostile, elephant on steroids. I fear the U.S. and Canada will rue the day when we decided to sacrifice our comfortable, competent, and largely self-sufficient national economies on the altar of globalization.

Joseph Z. Bako

Vancouver, B.C.

I feel compelled to contribute to the discussion under "Trading opinions about free trade" (Readers Report, Dec. 27-Jan. 3, replying to "The China price," Special Report, Dec. 6). I have a couple of degrees in economics myself, and it has always been entertaining to read the diatribes of Third World economists who come to this country to lecture us on the basics of a subject so thoroughly misunderstood in their own cultures. Having gone beyond mere survival (where Third World economics ends), we in this country are more attuned to optimizing benefits and choosing among alternatives that do not exist in the Indias and Bangladeshes of this world. To this extent, then, anyone advocating "free" trade is preaching to the Third World choir.

We are making decisions right now that will change what has become a runaway dash toward global free trade into something more measured. Open immigration, unrestricted economic warfare via the H1-B, and "free" trade pacts and areas will, hopefully, be evaluated not just on the basis of providing cheaper goods, but also by the impact (social and economic) they are having on those living in the participating countries. For my part, the advantages have long since carried an unacceptable social and national cost.

Geoffrey K. Wascher

Utica, Mich.

Robert Kuttner Laments in "What killed off the GOP deficit hawks?" (Economic Viewpoint, Dec. 27) that many have come to believe that "deficits don't matter." The supply-siders say we can grow the economy out of debt, and the "starve-the-beast" advocates (e.g., Grover Norquist) believe high debt will eventually precipitate a crisis and force needed spending cuts. Kuttner claims "both things can't be true" and blasts the GOP factions for inconsistency. But he's wrong.

For decades, Democrats relied on GOP deficit hawks to clean up their messes, happy to take credit for the spending while blaming those sour Republicans for insisting on higher taxes. The GOP got wise to this game and, under Reagan, called the Dems' bluff. Here's the deal, they said. We're cutting taxes. If you keep spending at reasonable levels, we'll grow our way out of deficit and debt. If not, the coming crisis will force spending cuts.

Either way, taxes and spending are coming down. No inconsistency there, just a hard choice for Democrats!

Steven P. Sawyer

Fountain Hills, Ariz.


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