if we privatized social security, would we invest in mutual funds or stock market?

Answer 1

There is very little difference unless the particular mutual fund is a money-market or bond account.


Hopefully the privatization scheme will only be optional, or partial....there is a large amount of people too stupid to invest in their own retirement.

Answer 2

The goverment would set it up the investments that are private are not going into compaines in Russia, or China, but stock market investments would be allowed probadly if the company is blue chip that will usually pay divdends. Probadly looking a mixed of mutual funds, stocks, bonds, tresurary notes. I think the more you work the more mechanism will lean towards bonds that is less risky of a investment. Thier still be the minimum payout guantee no matter what, but the invesment option is given as a way to make more money to retire on long term than would be provided with the returns the goverment gets thru tax reuvene.

Remember people they raised the soical security taxes 36 times in the last 70 years cant really raised much futher. Even if you could the extra tax dollars could not keep up with the tax payouts.

Answer 3

Oh if only. It would be diversified mutual funds that are invested in stocks, bonds, money markets, and REITs. Simplest thing in the world, in an hour I could personally design an idiot-proof system that forces people to be well-diversified across several asset classes (give you a hint, it would involve a pie chart and the use of four or five colors). It would definitely outperform social security (which is not an investment after all), zero possibility that it would not. (Social security as it exists cannot create wealth, it can only skim wealth from the private economy anyway).

A privatized system would NEVER be approved that would allow people to invest in individual stocks, or bonds, or commodities etc. Not worth even contemplating. It would be a menu of mutual funds, period, if we are ever so enlightened as to do it.

Answer 4

That's the problem -- it could be both, and some would be better at it than others... 401Ks already allow people to make some sorts of investments -- and how many of us are really even very comfortable with that?

From the Social Security Network:
Twelve Reasons Why Privatizing Social Security is a Bad Idea
Greg Anrig, Jr., Bernard Wasow, The Century Foundation, 12/14/2004

"Addressing Social Security’s potential long-term financing challenges by taking the dramatic step of diverting its payroll taxes to create new personal accounts will have drastic consequences for federal finances, future retirees, and those who rely on the system the most. Learn more about twelve major reasons why less costly and less painful reforms should be considered instead. "


"#REASON #7: Wall Street would reap windfalls from your taxes."

"Brokerage houses, banks, and mutual funds have been very active in the campaign to privatize Social Security. Small wonder, since they stand to gain enormous fees if billions of dollars are shifted each year from Social Security payments into accounts under Wall Street management. Of course, those fees must come from somewhere, namely from the balances in individual accounts. "

"Among the one hundred best stock mutual funds, management fees range from 0.2 percent per year to 1.4 percent of the asset value of an account. The average is near the high end of that range, however, and many mutual funds charge substantially more. Smaller accounts require proportionately larger management fees because many costs such as gathering and mailing out information do not depend on account size. Indeed, most mutual funds actively discourage small accounts by setting a minimum opening deposit of $1,000 to $3,000. "

"Experience in the United Kingdom offers a warning about what the future could bring regarding management costs. Workers there have been allowed to open private accounts starting in 1988, since which time management fees and marketing costs among financial intermediaries have eaten up an average of 43 percent of the return on investment." "

Answer 5

Umm, hopefully they'd be smart enough to go with a mutual fund which is basically a combination of stocks. Diversifying allows for a more secure investment that way if one stock goes down you still have the others. Simply put mutual funds are stocks, but if they are smart they will use other means such as bonds or something.