Date: June 15, 2011

To: Politicians
From: Richard Hoe

Ladies and Gentlemen:

I’ve been in financial services 43 years. In those 43 years, I’ve learned that Social Security private accounts will not work. Why? Because something like 70% of seniors could not live at all well without Social Security, and half of those could not live at all without the monthly government check.

The people who are well off will do very nicely with private accounts, as they have done with IRAs. People who have money, respect money. People who don’t have money, don’t respect it at all. It’s why financial advisors look for wealthy clients — we know people who have windfall money or those who are visiting a financial advisor on a whim will spend every dollar as soon as the first shiny thing that catches their eye comes along.

If private accounts are owned by the citizens who invest their money in them, they will be accessible for emergencies, loans and hardships. Why? Because this is the way government thinks and works — politicians like to be thought of as beneificent and kindly. Besides, if a person invests in his or her own private account, it’s his or her own money, right? So I predict if private accounts are enacted, something like 50-60% of the people who have them will access them for bass boats, cars and other shiny things. At retirement, 40-50% of the people with private accounts will probably have nothing left. If you think AARP is difficult, wait till you have 50% of seniors pounding on the capitol doors.

Social Security is not broken; it’s easy to fix. If you want to fix something, fix Medicare. It’s broken. Come to think of it, it’s badly broken.

Kind regards,

Richard Hoe

(Those of you who are not politicians — have a great week, okay?)

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