Wilmington, DE Male - 25 Years Old | Okay...I'm not a law student, so I preface this by saying that I don't know exactly what legal barriers would stand in the way of my SS proposal, but I figure politicians have themselves and an entire staff to figure out what would have to be done to make it legal.
My idea is actually semi-privatization. Basically, I don't see why we can't privatize the contributions, and then just back them up with government guarantees, a lot like the FDIC insures bank accounts.
Basically, a lot of conservative finance geeks will show you a lot of data about how, if we just let people invest their SS money into a 401K, they are far more likely to make more money from the 401K than from the SS account. The money grows more, earns more etc. However, I have two huge problems with using this fact to say "Just let people keep their own money! they'll do better with it than government does!"
1. Let's be real, Americans aren't going to invest all of that money. We, as a country, do not have the overall financial education to properly save to fully fund our own retirements
2. That defeats the whole purpose of the "security" part. People who wanted to retire in late 2008/2009 saw their 401k's almost completely depleted
So my solution would be a semi-privatization that attempts to capture the best of both worlds...the superior growth that 401Ks see, with the security that a market crash won't deplete your retirement funds.
Our current SS tax is 6.2%. I would propose that 5.2% of our tax goes into a 401k account for us and us alone, and 1% goes into a national pot. When you retire, the federal government guarantees that you get back, at the very least, what you put into the 401k. So say, for example, you contribute $500K over your lifetime to your SS 401k, but because of a market crash the year you retire, or maybe just because your particular 401k had some shoddy investments, it's only worth $350K by the time you retire. The government will then supply the extra $150K. This will be funded via the 1% of the SS tax that goes to the national pot. My theory is that since by and large 401k's out preform SS accounts, chances are that we won't have to dip into the national fund very often, or for very large amounts of money. So really it would hopefully only be used a lot during times of large economic downturns.
This basically makes it a forced savings program.
The biggest problem I can think of with it is that it suddenly puts a LOT of money into the market. I don't know what kind of effect that would have on the markets, someone more versed in financials would have to comment on that.
My more conservative libertarian friends still bitch about "it's my money, will I have access to it? it's my money! blah blah blah"...that would defeat the purpose of the forced savings program. I would say that you can, at the very least, choose which financial institution you want to control your 401K, and that maybe you'd be allotted one emergency withdraw that would amount to a certain, small percentage of the total contributions. I think anything beyond that (ie hiring a specific broker to handle your 401k) would be an option but that you'd have to pay said broker out of pocket or out of your account.
This plan would, hopefully, get the complete burden of SS off of our government, provide a boost to the large majority of retirement accounts, and not pull proverbial security rug out on retirees.
Apparently, this plan is something similar to what Republicans were kicking around back in the mid 2000s, but that's what somebody told me, I have no idea how accurate that is. |
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