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By partially privatizing social security, would we be able to end the issues currently involved with it?

Instead of part of our paycheck being taxed to pay for the benefits of those already retired, would it be more beneficial to have that money go into a personal account which can be used once we retire? How would something like this be set up and what could be potential ramifications?


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  • Apr 13 2013: It would be better to fund our own social security accounts--our dollars for our retirement. If what Congress says is true -there is a trust fund invested in US treasury obligations. Why not let each person put his 13+% of wages into an account that can buy only US treasuries (kinda like the US Treasury Direct program). We could shave off a portion of those contributions for disability(contribution weighted) and a death benefit (age/contribution weighted) for under age dependents. For example 10% of wages go to your retirement benefit, with the remainder funding the disability and death benefit. Upon retirement (no earlier than age 62) you can start drawing out of your account, roll it over to a life annuity from a private company of ones choosing (to keep the market honest and the government honest without buying our votes for greater benefits than can be justified), or leave it in until you want it or leave it to your selected beneficiaries.

    If this idea had been started in the early 80's, the first wave of baby boomers would have made out with 14% interest rates. Those 30 year bonds would just be maturing. $1000 of social security contributions would be worth more than $6000 today.

    My plan would always perpetuate itself and would not be actuarially out of balance. Without individual accounts, we will need to get the ages for withdrawal back to the range they were when it started in the 30's (Age 62 with male life expectancy at 57 and female at 61). Now we need to have benefits starting at 75 to be actuarially the same. This system wasn't designed to give 25 plus years of payments.
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      Apr 14 2013: Seems very well reasoned. I have one concern I hope you could address. With privatization do we run the risk of 'self interest' corruption by fund managers? If a decision made by a fund manager has devastating consequences for the fund (but not necessarily for the manager) what would be the back-stop?
      • Apr 15 2013: Under my scenario there are no fund managers. Each person buys US treasuries in $1000 increments and hold them until maturity. You buy the treasuries during the monthly auctions for 5, 10, & 30 year obligations. Your interest payments and contributions would be held in money market fund (could be managed by a manager) that invests in Tbills until the account crests the $1000 mark for a new bond.

        Historically US treasuries have yielded 6% over time, Between 2000 and 2010 they were one of the best performing asset classes.

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