PROFITIZING SOCIAL SECURITY
We should not necessarily be privatizing social security. We should be profitizing it. There is no reason why the government can not run Social Security as a relatively profitable venture that pays for itself. A reliable plan can easily be implemented to allow the government to maintain the Social Security system indefinitely into the future.
Bush's plan to create private accounts? I don't see any benefit in it. Private accounts have three ENORMOUS liabilities. The first liability is that it is impossible to determine how much money will be necessary for the duration of one's retirement. If one retires at age 65, there is no way of telling whether one is going to live to age 75 or to age 105. A retirement account sufficient to finance a 75 year lifespan will be woefully inadequate for a 105 year lifespan.
And if one's Social Security account goes empty, then what? Will we have 95-year-olds standing on streetcorners begging? Drooling in their wheelchairs, covered with exrement, slowly dying of starvation, do we just walk by and pretend that we don't notice? I don't think that the American people are hard-hearted enough to tolerate that. Consequently, once the person's SS account goes dry, they will have to have to go on welfare, so what is the point of changing SS?
First of all, Social Security can NOT be any sort of savings account. SS is NOT a savings plan. It is a PENSION plan. The problem with savings is that it is totally impossible to calculate how much you will need for retirement, since you do not know how long you will live. A savings plan might make sense if you knew for sure that you were going to die within 10 years of retiring. But what if you live to 110? If you retire at 65, and live to be 110, you will need enough money to survive for 45 years. How much money do you need in your retirement account to take care of you for 45 years after retirement? How much money should each individual have in their retirement account in order to take care of 10 to 45 years of retirement? Individual accounts make neither practical nor financial sense.
The second liability is the "ownership" approach, where you can pass on your unused money to your beneficiaries. This makes the whole system ENORMOUSLY more expensive, and makes it virtually impossible to pay for itself. The people who die early, and do not collect their benefits are the ones who essential finance Social Security.
Social Security can only be profitable if it is run as a "lottery". If you live to be 105, you "win" the lottery, and you get 40 years of benefits. If you die at age 65, you "lose" the lottery, and your accumulated premiums go into the kitty for someone else to use.
I think that this is "fair" in the long run. Nobody knows who will live and who will die, so all of the participants have an equal chance of "winning".
To guarantee the long-term success of the system, payroll deductions should be progressive and should be indexed to income. The rich can afford to pay more, but they will get somewhat higher benefits. A formula needs to be worked out.
It is not feasible to make participation voluntary, since there is no way that one can be sure of one's circumstances in the future. What if one elects not to be part of SS at age 30, but then becomes a pauper at age 70, and lives to be 110? The government then has to take care of the freeloader for 40 years, even though he didn't pay into Social Security in the first place.
If you die at 66, or 56, then SS makes a nice profit. You have been paying into the SS lottery for 40 years and you get nothing in return. But then you NEED nothing in return, because you are dead. You are now God's headache, not the U.S. Government's.
If you die at 96, then SS takes a big loss. But this is why SS private accounts are impossible. Even if you got a large sum of money when you retired at 65, it is extremely unlikely that it will last long enough to support you for 45 years. Unless you are a multi-millionaire like our President. This is especially the case, since you may need expensive drugs or non-covered medical care.
Bush's plan to create private accounts? I don't see any benefit in it. Private accounts have three ENORMOUS liabilities. The first liability is that it is impossible to determine how much money will be necessary for the duration of one's retirement. If one retires at age 65, there is no way of telling whether one is going to live to age 75 or to age 105. A retirement account sufficient to finance a 75 year lifespan will be woefully inadequate for a 105 year lifespan.
And if one's Social Security account goes empty, then what? Will we have 95-year-olds standing on streetcorners begging? Drooling in their wheelchairs, covered with exrement, slowly dying of starvation, do we just walk by and pretend that we don't notice? I don't think that the American people are hard-hearted enough to tolerate that. Consequently, once the person's SS account goes dry, they will have to have to go on welfare, so what is the point of changing SS?
First of all, Social Security can NOT be any sort of savings account. SS is NOT a savings plan. It is a PENSION plan. The problem with savings is that it is totally impossible to calculate how much you will need for retirement, since you do not know how long you will live. A savings plan might make sense if you knew for sure that you were going to die within 10 years of retiring. But what if you live to 110? If you retire at 65, and live to be 110, you will need enough money to survive for 45 years. How much money do you need in your retirement account to take care of you for 45 years after retirement? How much money should each individual have in their retirement account in order to take care of 10 to 45 years of retirement? Individual accounts make neither practical nor financial sense.
The second liability is the "ownership" approach, where you can pass on your unused money to your beneficiaries. This makes the whole system ENORMOUSLY more expensive, and makes it virtually impossible to pay for itself. The people who die early, and do not collect their benefits are the ones who essential finance Social Security.
Social Security can only be profitable if it is run as a "lottery". If you live to be 105, you "win" the lottery, and you get 40 years of benefits. If you die at age 65, you "lose" the lottery, and your accumulated premiums go into the kitty for someone else to use.
I think that this is "fair" in the long run. Nobody knows who will live and who will die, so all of the participants have an equal chance of "winning".
To guarantee the long-term success of the system, payroll deductions should be progressive and should be indexed to income. The rich can afford to pay more, but they will get somewhat higher benefits. A formula needs to be worked out.
It is not feasible to make participation voluntary, since there is no way that one can be sure of one's circumstances in the future. What if one elects not to be part of SS at age 30, but then becomes a pauper at age 70, and lives to be 110? The government then has to take care of the freeloader for 40 years, even though he didn't pay into Social Security in the first place.
If you die at 66, or 56, then SS makes a nice profit. You have been paying into the SS lottery for 40 years and you get nothing in return. But then you NEED nothing in return, because you are dead. You are now God's headache, not the U.S. Government's.
If you die at 96, then SS takes a big loss. But this is why SS private accounts are impossible. Even if you got a large sum of money when you retired at 65, it is extremely unlikely that it will last long enough to support you for 45 years. Unless you are a multi-millionaire like our President. This is especially the case, since you may need expensive drugs or non-covered medical care.
posted by Jack W. Orf | 2:53 PM
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Test to see if I can post anonymously.
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