Chile's example should concern us

President Bush has referred to Chile's experiment with private retirement savings accounts as supportive of his plan to institute something similiar here with Social Security. But, upon closer inspection we find that what has actually happened in Chile runs contrary to what Bush claims will happen here.

From The New York Times:

Nearly 25 years ago, Chile embarked on a sweeping experiment that has since been emulated, in one way or another, in a score of other countries. Rather than finance pensions through a system to which workers, employers and the government all contributed, millions of people began to pay 10 percent of their salaries to private investment accounts that they controlled.

Under the Chilean program - which President Bush has cited as a model for his plans to overhaul Social Security - the promise was that such investments, by helping to spur economic growth and generating higher returns, would deliver monthly pension benefits larger than what the traditional system could offer.

But now that the first generation of workers to depend on the new system is beginning to retire, Chileans are finding that it is falling far short of what was originally advertised under the authoritarian government of Gen. Augusto Pinochet.

The Times uses the example of Dagoberto Saez. Saez is a 66 year old lab tech planning to retire shortly due to a recent heart attack. His salary is roughly $950 per month. His similiarly aged professional peers at the same pay grade who didn't opt for the private retirement accounts would receive pensions of almost $700 per month if they retired alongside him. Saez, on the other hand, is slated to receive a pension of only $315 per month. Obviously he's concerned and dismayed.