Ask any Republican if we should privatize Social Security and you’ll get a resounding “YES!”. Meanwhile, ask any Democrat and you’ll get a resounding “NO!”. As usual, the reality is somewhere in between. Many reports have indicated that the current Social Security system will no longer be solvent in about 40 years (solvent means “profitable” – in other words we would be paying out more in Social Security than we took in). You can blame this on all the horney WWII vets.
It was after viewing this AARP “tutorial” on Social Security that I had what some might call a stroke of genius. I simply call it a stroke of common sense. Here are the pro’s and con’s of Privatizing Social Security as I see them currently.
As you can see there are a couple of pro’s and con’s to each. I don’t think privatizing will fix the problem of us paying less in that we pay out. Here is how I think Social Security should be set up now.
- Make Social Security optional. If I want to be in total control of my retirement then let me be.
- Have two avenues for Social Security: a.) Government Bonds (pros: simple, insured; cons: very little/slow growth) b.) Privatized Account (pros: potential for high growth, flexibility in investment choices; cons: corporate fees, not insured, could lose your ass)
- Make sure all Social Security benefits paid for by employers cannot be invested in private accounts. This way if you do lose your ass in the stock market you still have something.
I think this structure could appeal to all sides (including Libertarians: see #1). The problem is that no one is willing to budge on this – each side wants all or nothing. Sad.