It’s official: According to a recent article on CNN Money, you can now expect to receive less from Social Security than what you paid into it them. Here are the figures:
- $600,000 paid in.
- $579,000 in expected benefits.
This will come as no surprise to the skeptics and nay-sayers who have long felt that Social Security has been heading south and in need of some desperate revision.
In the spirit of conversation, I thought this topic would make an interesting “Ask the Readers” topic:
If the government were willing try something different, would you be in favor of the privatization of Social Security accounts?
I think one of the biggest benefits of privatizing Social Security would be shifting away from the uncertainty of its future. Right now it’s considered by many to be like a Ponzi Scheme where it gets funded by the dollars of the young (the new investors) to pay for the benefits of the seniors (the older investors).
If Social Security were to take on more “401k”-like aspects where the money is yours and not in some ambiguous pool of funds to be shared among everyone, then you would have more confidence that the money will actually be there when you go to retire. Right now Social Security is only expecting to payout 75% of what’s available by the time a couple in the 30’s gets ready to retire.
Also by taking on a privatized approach, investors would have more control over how the money gets invested. You’d likely get to invest your earnings in a wide variety of choices ranging from mutual funds, stocks, cash, real estate, annuities, etc.
The biggest con to the privatization of Social Security would be not having guaranteed income for life. Right now if you happen to live to be 120 years old, you’re still getting paid every month.
Another nice feature to Social Security is that you don’t have to know anything about investing or the plan itself to reap its benefits. If there was some kind of privatization, there would likely be great debates as to whether we could really expect everyone to make their own financial decisions. Perhaps their fund could be some default hybrid stock / bond index fund or target date fund?
And would contributions be optional? I certainly hope not! Given the savings rates of 401k plans and other retirement funds, if Social Security were suddenly optional, there would unfortunately be a ton of people who simply wouldn’t participate at all. And that would lead to a lot of problems later on.
Finally, let’s also consider why Social Security was started in the first place: To take care of those who couldn’t take care of themselves. There are many “welfare” elements to Social Security that a lot of people don’t realize until they need them. If the privatization of the plan were to reduce or eliminate those benefits for others, you would again have a lot of problems on your hands with people who are less fortunate going without.
The Privatization of Social Security:
What do you think? There are good arguments either way. Which direction would you rather see things go in?
- Social Security Benefits – The Kid Picked Last for Dodgeball
- Social Security Spousal Benefits – Hook Me Up Elderly Sugar Momma!
- When Can I Retire – It All Depends On How Badly You Want To!
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