Privatization of Social Security
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Privatization of Social Security
When people lease a car, they pay, knowing that they get something in return. When people pay taxes, they pay, knowing it's the law, and many get some money back. What do people think when they pay social security? Many young people see Social Security as something they are paying but will never get anything in return. What is another way for retirement for the United States?
A major topic of retirement talk today often ends up with the new idea of Privatization. Privatization would be a way to retire by means of putting money in your own individual account. It differs from social security because it only goes into separate accounts, not one huge budget. Instead of paying a certain percentage of taxes to Social Security, a separate account would be created for your retirement fund. A percent of your paycheck would still be taken out, but it would be your choice on how much, and no one else could ever touch it, until after your death. You would also be given the opportunity to use this money, and try to double the amount by investing in bonds. Privatization has many benefits, and would be a great help for retirement troubles. It would be a great way for people to leave an inheritence for their families (Tanner, "Saving Social Security is Not Enough").
A feeling of frustration is often felt when people [not receiving social security] obtain their paychecks and a large part of their money goes to social security. If they are of certain age, they will never see this money, as the Social Security system in its present form will be bankrupt. The only way to save the Social Security System is a tax increase. In 1998, a general tax increase of 2.2 percent was planned out to aid in social security (Howe). Now, in 2001, it still hasn't taken place. It will take a larger increase now, three years later. The thought is quite terrifying. With the 2.2 percent increase, it was estimated it would cost around seventy five billion dollars to save social security. The 2.2 percent number was given after looking at the "trust funds" for Social Security. However, all that really exists in these funds are IOU's from the nations Department of Treasury (Howe). A 2.2 percent increase is not a viable solution.
It would need to be increased so every year so that the actual 2.2 % would only exist for the first year. It has been estimated that the social security fund will dwindle to the negatives in 2013, and never come back. (Howe) Even with the 2.2% solution, it doesn't solve the problems from deep within. This "simple solution" doesn't even address the big picture.
One of the bigger problems is with the younger workers because this plan doesn't benefit them anymore. The idea of the 2.2% solution is simple, but short-termed. With the current funds, Social Security can exist until 2032, and with the 2.2% it could last until 2072. (Howe) But these ideas will both only happen with the use of the Social Security trust funds. Because of Congress, these trust funds are almost non existent.
Who exactly does social security benefit? The United States as a whole? Does one gender seem to receive more than the other? The facts indicate that women do not benefit as much as men with social security. Women live longer and are paid less, making them twice as likely as a man to be in poverty when retired. In 1995, a retired male on the average received eight hundred ten dollars a month, but a women only received six hundred twenty-one dollars. Not many women earn enough money to pay both their social security and keep a private account for retirement. Women also don't have as many opportunities for a pension plan and their longer life expectancy creates a need for more money. Social security can leave widows with one half of the income that she was receiving when her husband was still alive, thus creating a large poverty rate for elderly women. (Shirley) Privatization would benefit women greatly by letting them keep receiving income from money their husbands put aside. Instead of cutting the benefits after their husbands death, they would also receive income from the money they put aside.
Among everyone in the United States, there is a group of people who depend on social security the most. Sadly enough, it is these people who receive the least. The poor are always more likely to look for benefits for retirement: they have the least money. Because of the low return of Social Security, poverty is common with the elderly. Not only do the wealthy have more money, they usually live longer and receive more payments. Wealthy people make more money, and pay more social security, so just because the poor people don't make as much money; they have to suffer in the end. With privatization, life expectancy would not be a factor. People would have a property right with their benefits, and any remaining benefits at the time of their death would go to their heirs. (Tanner, "Privatizing Social Security"). There are those who have depended on welfare for their life; privatization gives those people the chance to make more money to leave poverty. They have the chance to invest their money in bonds. It is those people who have depended on government programs such as housing projects and food stamps. Their family will continue on down the line needing government, help due to the fact that their successors in life will receive nothing from them when they die.
People often die with no wealth or savings for their heirs, therefore continuing a cycle of government dependency for money. (Star Parker) The major factor of privatization is its high return rate. This would benefit the poor greatly. In the United States today, the poorest twenty percent of the elderly need Social Security to provide for eighty-eight percent of their income. (Tanner, Privatizing) Even though Social Security has helped over 16 million people out of poverty, there is not any money left to help the new incoming elderly, and baby boomers. Baby Boomers expect a return rate of 2.4%. Those born in the seventies should already only expect 1% return. ("The Arguments..."). Privatization would give them a larger opportunity to get more money after retirement. Research indicates that as time goes on the poor elderly get poorer, and the wealthy get wealthier. Low-income elderly will basically depend fully on social security while rich people often will have private pension plans to supplement their social security. It is thought that if one were to want to live in retirement, as they did in pre-retirement they would have to pay sixty to eighty-five percent of their income to social security.(Tanner, Privatizing) However, social security does not take close to that amount. Therefore it does not provide a good retirement for many, especially the poor.
With privatization, the people would be given the opportunity to invest some of their payroll taxes in bonds. This could add greatly to their benefits. The poor would have the chance to actually have a retirement instead of their inadequate little social security check. Privatization's higher returns would equal ninety-two percent of their pre-retirement income and if they invest in bonds, it is increased into one hundred eighty-eight percent. That much income could never be possible with the present social security system.
Survivor benefits are extremely better with Privatization than that of Social Security. Under Social Security, after a member of the family dies, their paycheck from social security no longer exists. The money they once paid, will benefit no one in their family. However, with Privatization, the family benefits greatly. They inherit all benefits left by the deceased person. (NCPA Report).
Privatization is the retirement plan of the future. With Social Security anticipated to last a few more years, we need to look into a new plan. Privatization would benefit all, and provide a much more stable income for retirement. There is a choice for the American people: Pay for someone else to retire, and have nothing when you get there, or push to get a new plan; a plan that will work, a plan called Privatization.