John Bogle

Bogle Speaks Out on Social Security

John Bogle

Unfortunately, John Bogle isn't on the ticket for the upcoming 2000 presidential elections, but he would certainly get our vote if he was in the running. Oh well, there's always 2004.

In a recent Associated Press interview, Bogle expressed his dissatisfaction with both of the major parties' proposals to save Social Security.

"Neither of the proposals makes it," said Bogle.

Rejecting Bush's privatization plan and Gore's incentivized savings plan, Bogle's answer, with typical Bogle-esque beauty of simplicity, is this: open a gigantic index fund, select the nation's finest financial minds to run it, and operate it with miniscule fees.

Not surprisingly, given the fact that he is still going very strong at age of 72, Bogle also advocates raising the retirement age. He notes that Americans are living longer, yet our retirement program has not addressed this fact. Apparently, scientific advances in nutrition and medicine haven't been matched by breakthroughs in federal fiscal planning.

Bogle believes raising the retirement age will soften the harsh reality that America must soon face: unless Social Security taxes are raised or benefits are lowered, experts believe the system will bankrupt by the year 2037 (for a detailed discussion the fiscal state of Social Security, check out Jim Wiandt's article on Bush's plan).

Understandably, neither presidential candidate wants to be the bad guy who sent my dad back to work just when he was getting ready to retire and tend those geraniums full time. But, notes Bogle, the only genuine solutions are the toughest ones, and therefore the ones politicians are most likely to avoid.

Mr. Bush proposes to allow Americans to invest a small (and as of yet unspecified) portion of their Social Security taxes in the stock market. Bogle opposes the Bush plan because of its privatized nature. Under such a plan, he says Americans would encounter management fees when they invested Social Security taxes in stocks and mutual funds, fattening an already bloated financial services industry.

Mr. Gore proposes voluntary middle- and lower-class contributions to the retirement program that would be matched by the government on a sliding scale based on household income. Bogle believes the Gore plan is unsuitable because middle- and lower-class citizens have a hard enough time already making ends meet without setting aside money to contribute to the retirement program.

"It [the Gore plan] makes political points," said Bogle, "but if no one is using it, it's clearly not going to make Americans more self-reliant in providing for their retirement incomes."

Bogle envisions a government-sponsored retirement/investment fund that would be managed by an independent Social Security Retirement Board made up of "appointed figures of unquestioned integrity and financial acumen." The board would select the stock holdings of the fund, which would track the performance of the entire stock market. And, naturally, investors would be charged razor-thin management fees.

"If the market returns 10%, investors will get 10%," said Bogle.

Well, Bogle gets our write-in votes for this year's election, though we doubt they'll make much difference.

And the mother of all index funds to save Social Security?

We think it's a great idea, as long as Mr. Bogle promises to sit on the management board.