What is social security? what is privatization of social security and is it good or bad?

Question

What is social security? what is privatization of social security and is it good or bad?

Answer 1

Technically Social Security is a blanket term for a social program here in the U.S. that encompasses guaranteed retirement benefits, disability insurance, short term unemployment insurance, temporary assistance to needy families, medicare (health insurance for the elderly), medicaid (health insurance for the poor), and various SCHIP programs.

It's funded by a 7.65% automatic deduction from your paycheck, and matched by your employer, making 15.3% of you total income under $102,000.

Bush tried to do something good with Social Security in the form of partial privatization, but special interests, lobbying groups, and liberals stopped him in his tracks.

Why did he want to privatize it? Because the current system will fail eventually and so far the only other plans to save it are to reduce benefits, raise the retirement age, and have a very socialistic steep progressive tax system that would create a further disincentive for high income earners.

Basically, privatizing social security would give the people that pay into the system, i.e. you and me, the power to decide where it's invested.

It really bugs me that there is still a large part of the population who believe that people can't retire without the help of the government. I really hope that someone will at least partially privatize social security retirement benefits because:

1. I'm a firm believer that I can handle my money more responsibly than the government.

2. Personal responsibility is not something that people take pride in these days and that needs to change.

3. The current system has a negative rate of return.

4. The system is going to go bankrupt, and so far there are only two major solutions: tax my income and gains on my investments into oblivion just because other people aren't smart enough to save for themselves or partially or fully privatize the retirement part of the system.

The democrats have expressed interest in raising capital gains tax rates to help pay for SS, which will tax the h**l out of people like me who are being responsible and investing for myself so I can have a secure retirement and giving that money to people who either weren't smart enough or were too late in their investing. This is a massive injustice.

Barack Obama has expressed interest in getting rid of the $102,000 cap, which would be an extremely large tax increase.

You'll hear many arguments against privatization, but it helps to know where social security came from.

The Social Security Act was enacted in 1935 as part of the New Deal. It was signed into law by Franklin D. Roosevelt. The first payroll taxes were collected in 1937 and the first monthly payment was delivered in 1940.

The retirement benefits were never meant to provide 100% of a person's income after 65, but rather to just supplement their savings. (This does not include Supplemental Security Income (SSI) which is a welfare program for peoples over 65).

So, when Bush wanted to partially privatize the system, special interest groups came up with quirky commercials and eventually succeeded in destroying the plan, and thus destroying the only thing at that point that could've helped solve the problem of the system going bankrupt.

On a side note, people like you always seem to whip out the "put your future at the mercy of the stock market" argument to scare people. If you spend 30 minutes learning the basics of investing, namely the importance of having a well diversified stock portfolio (which is easily achieved by mutual funds), you can reduce the risk tremendously.

That being said, what Bush wanted to do in 2005 was partially privatize the system, allowing for less strain on the government and more earning potential for our money that is, quite literally, stolen from us in the form of payroll taxes.

Currently 15.3% of our paychecks are taken by the government in the form of payroll taxes. Only 7.65% is actually taken out of our paycheck, the other 7.65% being payed by your employer.

Bush's plan was to let us decide where 4% of the 15.3% was invested. That would leave the remaining 11.3% for the government to use the old way.

All Bush wanted to do was give us, the people, a choice of how our SS money was invested. All he wanted to do was let us control how 4% of the 15.3%

Is that really that crazy of an idea? I don't think so.

But Democrats and the God-forsaken AARP started a nice smear campaign that shut that proposal down quick, fast, and in a hurry.

I believe that partial-privatization is one of the many answers that we have to consider to fix our crippled system. But until our politicians on both sides can put aside political bickering, which won't happen anytime soon, there will be no fix.

And, again, don't buy into the whole "you'll end up like Enron" arguments. Anyone dumb enough to invest solely in single stocks must not care too much for their financial future.

Anybody who learns even a little about investing will figure out that you must have a very diverse portfolio of investments in order to protect yourself from hiccups like Enron.

Millions of Americans invest on their own and make a lot of money to secure their retirement. It's not just rich people who benefit from the stock market.

Hope this helps!