Should U.S. Social Security be privatized?
In 1936, the federal government published an informational pamphlet on Social Security. It stated: "…and finally, beginning in 1949, 12 years from now, you and your employer will each pay 3 cents on each dollar you earn, up to $3,000 a year. That is the most you will ever pay." http://www.ssa.gov/history/ssn/ssb36.htm... ----- Nothing like a multi-trillion dollar government lie to promote a program. If corporations are not allowed to get away with billion dollar lies, I see no reason why the government should be able to get away with much worse. Social Security has only done 2 things: -Created government dependency -Created financial illiteracy It needs to be eliminated and we need to give --gasp-- LIBERTY a try. At the very least, do not force people against their will (in the land of the free) to participate in this poverty creating program. Politicians can not run a lemonade stand, why would I want them controlling my retirement. This has nothing to do with "togetherness", "common good", or "compassion". It has to do with freedom. .
Will Social Security ever be privatized into individual savings accounts?
Social security is fundamentally different from a private savings account in several ways.1. What you get is supported by the current income flow, i.e., the social security tax paid by current workers, instead of your savings. 2. The social security benefit is not proportional to what you put in. Lower income people get more than higher income ones (relative to the tax they pay). So it is also a redistribution.3. The benefit you get is guaranteed (legally by the Social Security Trust, practically by the whole Federal Government). There is no risk concerning stock market fluctuation and inflation rate. 4. Social security is also an insurance against longevity. You will keep getting benefit as long as you live, and will never run out of principal. Items 3 and 4 and be realized by certain types of private investment, such as certain types of annuity. But I don’t know how their returns are, comparing to Social Security. Items 1 and 2, however, makes social security more like a tax than investment.
Would it be better to put Social Security into private accounts than let the government handle it?
You would have to explain for whom? Social Security is generating empty promises at a staggering rate. The unfunded obligations of the system grew $1.8 trillion last year alone. That is $2 of broken promises for EVERY $1 collected. The question to your question is on whom would the empty promises fall. Once you divert revenue away from Social Security. The system will be unable to pay full benefits. In that case, it would benefit younger workers tremendously. If the younger workers are tasked with providing additional tax revenue to make those near retirement whole, the younger generations would be worse off. In terms of national policy, insurance is a better tool to manage risk than savings is. Old-age insurance is very similar to health insurance. There is about 1% chance that you will live to 100, and the costs of that small event are staggering. In a private account world, everyone would have to save sufficient amounts to cover how long they MIGHT live. In an insurance world, the pool has to save sufficient amounts to cover how long people ACTUALLY live. Hands-down it is cheaper to manage risk through savings. This article looks at the cost of privatizing the Social Security system : The Risks of Privatizing Social Security This article looks at the differences between insurance and savings.Going in the Wrong Direction
What is privatizing social security?
Currently, the federal govt collects payments from everybody, and puts it in a big fund like a group retirement plan. When people retired, they get payments out of this fund. The idea behind privatizing social security is to take the government out of the banking business. Essentially, each person would be allowed to save or invest their money privately, rather than being forced to pay into the government group plan. Some proposed models require the same payments, but allow the individual to choose which fund to pay, while others make payment optional entirely. In other words, if people didn't want to save for their retirement, it would no longer be mandatory. The downsides are that some people will reach retirement age with nothing, if they don't choose to save. Those who believe it's the role of the government to provide financially for the population see this as a bad thing. Those on the other end of the spectrum believe it just holds people accountable for their choices. The other potential problem is that it leaves open more possibility for fraud, or that another financial scandal might cause one of the private retirement funds to go bankrupt, either causing potentially millions of people to lose their retirement investment. The counter to this argument is that the US government isn't particular good at managing money, and most estimates hold that the Social Security fund will itself be bankrupt within 30-40 years. So, the argument goes, if we know the government plan is going to fail, we might as well allow people to opt-out of it now.
Should the USA privatize Social Security?
No for the following reasons Social security functions as an insurance fund. Most buyers of insurance lose money by definition in that only a minority collect on insured losses that exceed their premiums. Yet insurance is economically rational simply because one cannot afford to be self insured. That is why auto insurance is required by law despite the fact that most people will lose money purchasing it.People are free to save for their retirement privately outside of social security. The social security benefits are minimal. The social security median benefit is around $1,170 per month (Income from Social Security). By definition many seniors have benefits below the median (medians are useful, averages are NOT btw). In fact 15% of the seniors nationwide live below the poverty level (Poverty Among Seniors: An Updated Analysis of National and State Level Poverty Rates Under the Official and Supplemental Poverty Measures). "Almost 75% of single Social Security recipients aged 65+ depend on Social Security for all or most of their monthly income. (Social Security Administration)" - See more at: Social security reduces the future tax liability for all taxpayers by forcing people to at least partially fund for their retirement reducing the amount of future public assistance required for impoverished retirees.Individuals make horrible investors. Individual investors, repeatedly panic, buy high / sell low, follow fads and make the worst irrational investment choices. I for one have indirectly profited for this for decades in that the equity markets are in part and zero sum game. The vast majority of people are simply incapable of managing their money. Using external money managers is no better as these money managers charge fees. Money managers have an inherit economic conflict of interest wishing to extract the maximum possible fees which decreases one's investment return. I for one manage my own money for this reason.
Your opinion of Republicans wanting to Privatize Social Security?
What's your opinion? Republican members in the House have introduced legislation which would take your Social Security contributions and give them to Wall Street. For those in Congress who routinely target safety net programs, like Social Security and Medicare, this Social Security plan is the perfect companion legislation for the GOP/Ryan Budget. Ryan’s CouponCare plan would put insurance companies in charge of seniors’ healthcare while the so-called “SAFE” act would put Wall Street in charge of your retirement savings. Do you feel safe? “This Social Security proposal is political opportunism at its worst. Supporters use the current fiscal crisis–which Social Security has not contributed to in any way– as an opportunity to defund a program many of these members do not support in the first place. The privatization of Social Security does not have support among any age-group or political affiliation once you step outside the Beltway but it remains goal #1 for those who want Wall Street in charge of billions of hard-earned American tax dollars. Max Richtman, NCPSSM Executive Vice President/Acting CEO These privatization proposals aren’t about fiscal responsibility because neither will save the federal government money. The transition costs for converting Social Security into a privatized system would cost trillions of dollars while the GOP/Ryan plan for Medicare adds $13 in waste for every dollar saved. Meanwhile, millions of Americans lose their guaranteed benefits in exchange for a ride on the Wall Street roller coaster and coupons for their healthcare. Let’s not confuse what this debate is really all about because privatization is a political goal not fiscal responsibility. For so many House Republicans who worked hard last fall (before Election Day of course) to convince American voters they haven’t and weren’t proposing Social Security privatization, this legislation certainly now destroys that claim. It’s only been six months since the GOP regained control of the House and they’ve wasted no time pushing to privatize both Medicare and Social Security, at a time when millions of Americans are still suffering in an economic crisis these programs did not create. Source: http://www.ncpssm.org/entitledtoknow/?p=1780
What's wrong with our social security system?
I'm also not a tenth grader slacking off on a homework problem. There is SO much info on social security. I have tried researching. I need a broader understanding of how social security before I attempt to have an opinion on it. For example, what does it mean to "privatize" social security?