Why privatizing social security is a bad idea

An op-ed in the Washington Post argues that privatizing Social Security is a bad idea:

Why is privatizing Social Security such a turkey? Because retirees shouldn't have to depend on the market's vagaries for survival money. More than half of married couples older than 65 and 72 percent of singles get more than half of their income from Social Security, according to the Social Security Administration. For 20 percent of 65-and-older couples and 41 percent of singles, Social Security is 90 percent or more of their income. That isn't projected to change.

Using personal accounts to replace Social Security's guaranteed benefit would subject people to two separate risks. First, there's investment risk: Most people have no idea how to invest well - study after study shows that mutual fund buyers tend to buy high and sell low. But even if you manage to invest well, you run into the second risk, largely unrecognized, that interest rates will be low when you retire.

Let me show you how this works, using numbers from Vanguard. Let's say you had $200,000 - a not insignificant sum - in the Vanguard Target Retirement 2010 fund as of Sept. 30, 2007. That was a few days before stocks peaked.