The Dow Jones Industrial Average closed above 13,000 yesterday for the first time ever.  In other news, we still don't have personal retirement accounts.

I wonder how most people felt yesterday when they saw reports of the DJIA's record-breaking performance, on one page of the newspaper, and reactions to the funding shortfall forecast by the OASDI Trustees Report, on another.  It was a thought-provoking juxtaposition, wasn't it? 

For those unfamiliar with the DJIA, it's an index of 30 large U.S. companies that reflects the performance of the stock market.  The index includes companies such as AT&T, McDonald's, Microsoft, and Wal-Mart.  For historical comparison, the DJIA first closed above 5,000 in 1995; 10,000 in 1999; and 12,000 in 2006.

Opponents of investment claim that stocks are risky, but that isn't a valid criticism of personal accounts.  For example, lifecycle funds are a type of mutual fund that automatically become more conservative over time, allowing growth in the early years of investment and security in later years.  Fidelity is one of many companies offering such funds, and I'll use their Freedom 2050 fund as an example.

The Freedom 2050 fund is for investors planning to retire in 2050, which is about when today's graduating college students will turn 65.  So far this year, the fund has a return of 7.44% (adding in last year's numbers makes the return go even higher).  How does this compare to Social Security?

Well, the average single male turning 65 in 2050 will receive a 1.14% rate of return from Social Security, while the average single female will receive 1.52%.  If that average male and average female get married and both work, their rate of return will be 1.48%.

Doing a little math, the Freedom 2050 fund is currently outperforming Social Security this year by more than 6-to-1 for the average male and more than 5-to-1 for a two-earner couple. 

Now why is it again that we can't invest a portion of our Social Security contributions?

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