The Drawbacks of Social Security Privatization
Privatization has been shown to save governments money in many instances. When it comes to Social Security, there have not been serious discussions on privatizing the program since about 2005. The idea does sound plausible on its face, as it would give workers more of a stake in their own financial planning and an opportunity to earn a greater return in the stock market than could ever be derived from the current 2-3% rate of return. But, as Sean Williams points out in this article, 94% of Americans failed a basic 11-question financial literacy quiz last year. That’s not encouraging when it comes to empowering people to make their own decisions. Perhaps more importantly though, is what privatization schemes do to the insolvency problem facing Social Security over the long term. By taking a portion of payroll taxes away from paying benefits and diverting them to personal accounts, the ability of Social Security to pay promised benefits is compromised. The program is facing financial difficulty and will be insolvent by 2034. There are other ideas and reform proposals in Congress and from other organizations that shore up Social Security’s finances without privatization. Read more here.
The Association of Mature American Citizens (AMAC) has developed a bipartisan compromise bill, titled “The Social Security Guarantee Act”. One of its several components is Social Security PLUS, a new yet voluntary early retirement plan that would allow all earners to have more income available at retirement. Learn more about AMAC’s Social Security Guarantee here…
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