Should U.S. Social Security be privatized?

Question

Fully privatized? Partly privatized? Not privatized? Why or why not?

To clarify, I refer not to, say, Goldman Sachs buying the social security system. I refer to a system in which your social security taxes are applied to something like a 401k plan containing mutual funds to invest in. Perhaps with an insurance component to replace social security disability and death benefits.

Answer 1

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.html
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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.

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Answer 2

The most important characteristic of social security is that it is an inflation adjusted annuity. Private investments on average pay more because you also get a risk premium. The results from inflation and market history since social security creation using private markets with the best strategies suggested by financial consultants, predict that most people would have more but about 20% of people would have run out of money before they died. This is a risk most people do not want to take in order to increase their retirement income. People who want more income can save extra in private accounts, but if a period of high inflation like the 70's occurs they will be very glad that they also have social security.

Answer 3

Theoretically it should be fully privatized. But, we don't live in a theoretical world and Social Security does help prevent the grasshoppers from crashing society when they get old penniless.

But, the current system is another wreck waiting to happen. The government spends the surplus SS revenue and stuffs the SS Trust Fund full of non-marketable IOUs that earn less than market rates of interest.

I don't understand why more people can't see that all citizens would stand to gain with a privatized Social Security system.

First, we'd have more freaking money to retire on and build wealth for future generations. The current system pays an average of 1.5% to 2.0% and doesn't allow any carryover to your family members. A privatized system could double that rate of return with no risk allow you pass on the leftover accumulation to your family. Consider $100 that grows at 2% annually for 30 years - you end up with $181. If it grows at 4% annually for the same time period you get $320. That's quite a difference.

Second, you build more accountability into the government. Currently, there's no penalty for the government to rob Social Security and use it to pay general expenses (if company managers treated their company pension funds the same way, they'd be jailed). The government would have to give you a fair rate of return on your money in order to get the right to spend it, otherwise you could invest it elsewhere. Having the government compete for your investments would create another form of check and balance (i.e. YOU) in the government spending that doesn't currently exist.

Answer 4

Why would anyone want to own Social Security? To gain by the ownership? Gain how much? Would there be any legal limits to that gaining, or could the owner pretty much walk away with the loot? If the corporatized Social Security went bankrupt, what would happen to the people who'd depended on it to provide their medical care?

Now, it might be better for Social Security to be abolished, but if that's what you want to do, don't be sneaky about it.

Answer 5

some cities opted out of paying their workers into the social risk-free practices equipment. and those workers retirements are greater valuable than Social risk-free practices! some people CAN make investments properly, and be very effectual. The Wall highway bankers are an occasion of effectual (optimistically) making an investment. however the diverse OW??? protests elect their student loans and living house loans canceled simply by fact they could't have the money for to pay them lower back. a extensive occasion of undesirable funds administration / funds making plans.

Answer 6

Probably not. The vast majority of individuals are very bad at saving and even worse at investing. The U.S. household sector, for example, has a negative savings rate (it spends more than it earns).

For a quick (literally, two and a half minutes) introduction into the problem, watch this video:

http://video.google.com/videoplay?docid=-8199791348227906074