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Should we Privatize Social Security?
Questions?
Should we Privatize
Social Security?
By Cris Palackal
How does it work?
Why is this worth arguing about?
- Cost of Social Security benefits will exceed tax revenues beginning in 2020.
- Insolvency by 2034; can pay only 79%
Causes
People are living longer now vs. before.
People aren't having as many children as they used to.
Example
$100,000 per year starting 2020.
$6,200 per year x 40 years:
$248,000.
But because of insolvency, the most you get out of that is $195,920 - a loss of $52,080.
Quick Facts
Conclusions
Social Security has helped millions to date, but the current system cannot continue.
Social Security is the largest single government program in the world.
In 2014, 22% of married retirees and 47% of unmarried retirees relied on Social Security for 90% or more of their income.
What is Social Security?
Pros for Privatizing Social Security
Established by Franklin D. Roosevelt - Social Security Act (Aug. 14, 1935).
Made to protect workers and families from loss of income after retirement.
- The current Social Security program will become insolvent by 2034, so a better system is urgently required.
- With personal accounts, retirees will see higher returns on their investment.
- Private accounts give individuals control over their retirement decisions.
Examples of Privatization Working:
Cities of Galveston, Matagorda and Brazoria in Texas
Opted out of SS over 30 years ago.
Use "Banking Model" - contribution managed by financial planner.
Proved to be significantly better than SS program.
The Numbers
- Lower-middle income worker: $26,000 SS - $1,007, Banking Model - $1,826
- Middle-income worker: $51,200 SS - $1,540. Banking Model - $3,600
Cons for Privatizing Social Security
- Lower-middle income worker: $26,000 SS - $1,007, Banking Model - $1,826
- High-income workers - Max out SS SS - $2,500, Banking Model - $5-6,000.
Social Security levels the playing field for rich and poor, whereas private accounts would favor the wealthy.
People cannot make wise investments on their own.
Guaranteed benefits would be reduced significantly under a privatized system.
Bruce Kovner
Started with: $3,000
Now worth: $5.3 Billion
Curt Shilling
Was worth: $115 Million
Now worth: $1 Million