Social Security

By Erik J. Bauman

The best prescription for Social Security is privatization. Everyone would be better with private accounts and now is the best time to transition.

This would mean that a person could choose to put his or her Social Security retirement taxes into a personal retirement account. These accounts would be similar to 401(k) accounts where employees invest their money in one of a few approved investments through their employers.

With private accounts, workers get much more money in retirement, they don't have to worry about politicians' funding, they can pass along the money to family members or friends, and they can choose their retirement age.

How would privatized Social Security affect:

Women
Today, a working woman is likely to retire with the same Social Security benefit she would receive had she never worked at all. This is because most women haven't earned as much as their husbands by the time they retire and their contributions are effectively erased. With private accounts, women's payroll contributions will always count towards added retirement benefits.

Minorities
African-Americans and Hispanics stand to benefit from private accounts much more than the general population. Because most minorities tend to start work earlier, the benefits of compound interest will be greater once they reach retirement age. In addition, the average lifespan for these two groups is lower than that for the overall population. This means that the same amount of money will buy greater monthly retirement benefits, and that individuals who die before reaching retirement age can pass their money along to family or friends.

I ask you to briefly imagine the impact on long-term, intergenerational poverty if people were allowed to pass along all the Social Security taxes they ever paid, plus interest, to people in their families and communities. Our current system does not allow that to happen.

Young People
The younger a person is, the more he or she would benefit from choosing a private Social Security account. This is purely the magic of compound interest at work; $1,000 today will be worth almost $32,000 in 45 years earning an 8% return. Young people today would be able to retire much earlier than 65 if they choose; the alternative is allowing today's sytem to continue and pay only 73% of promised benefits.

People Getting Ready to Retire
Private accounts would mostly affect those about to retire in the future, when they see their children and grandchildren become wealthy through long-term saving. The government will always guarantee benefits to retirees equal to the standard Social Security formula and the income of the newly retired wouldn't be affected.

For people around age 50 or so, it should be noted that England began partial privatization 20 years ago. Today, the number of seniors owning homes is 50% higher than it was 10 years ago, and their income is 50% higher as well.

Communities
The greatest impact would come to the poorest communities. It is here that families with few assets and retirees with low incomes would see the greates increase in their wealth. Private Social Security accounts, through increased retirement income and the ability to pass along assets to the next generation, will have a tremendously positive effect on poor communities.

Private Social Security accounts are a winner for everybody. They are wildly popular in the United Kingdom, Australia, Chile and many other countries. Visit my web site for more details.

http://www.BaumanForCongress.com