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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?

  • Apr 20 2013: Social Security, in the US , is an attempt at providing for people too old to work. As I understand it, is has been working fine for generations, and the only "issue" with it is that Congress frequently raids the cookie jar to fund various ill conceived scams. That is clearly a problem. But "Privatizing" any part of it, i.e giving it away to Wall St. to manage, is like inviting the Fox into the Henhouse. I find it hard to understand how anyone can even consider this, given the utter selfishness and corruption of the Wall St. group, as well as their incomptetence., demonstrated over the last 10 years.
  • Apr 15 2013: Make it simple...
    The monthly tax is smaller then your pension will be. If you want at least the same money once you are retired, you would need to put a larger sum of money aside each month. Plus what you need to correct the loss created by inflation.

    And, most private pension plans are backed up by stocks. If not already wealthy, your idea would worsen your life, cause private pensions affect your life in the way that you have to work more without earning more money, to satisfy the stock owners. If all pensions would rely on that system, your loan will decrease, because where else should they pull the money from.

    It is always the working class, or better each single person who is dependent on a income created by work.
    So at all nothing would change, the only change would be less life quality in younger years, in the best scenario (which never happens) the pensions would be the same like today, but the benefit goes to the stock owners, not those holding just a few, but the big guys again.

    If you like this idea, why so complicated, just send the rockefellers of today your money by post-that easy. Your money will be lost, but at least you get a pension from state that is guaranteed.
  • Apr 14 2013: Social security is an insurance program, not an investment program. It is designed to be very low risk, and therefore it will never have as high returns as a market based retirement solution. On the other hand, it will not be wiped out every time there is a stock market crash, either. The issues with the sustainability of Social Security are overblown by self interested investors who have skin in the game of overhaul, whereas simple adjustments of how much is collected and from whom would keep the program solvent throughout the baby boom bubble and beyond.
  • 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.
  • Apr 13 2013: The people that suggest this are usually not friends of social security. If we keep collapsing the wage structure of this country we are going to have more serious problems.