Wednesday, February 16, 2005

Put the Security Back In Social Security

More on the Social Security front. Rep. Paul Ryan (R-Wis) had an article in yesterday's USA Today on the benefits of private social security accounts, also discussed here on A Time For Choosing. Rep. Ryan states:

By giving younger workers the option of putting a significant part of their wages — say, 6% on average — into personal accounts they own and investing in a secure, government-approved retirement fund, we can eliminate long-term Social Security deficits.

In fact, personal accounts help reduce the need to cut future benefits or raise taxes to restore solvency to Social Security. And the larger the personal accounts, the less Washington will have to resort to such steps. This is because, over time, sizable accounts cover more of the program's benefit obligations, as future retirees draw on the savings and interest that have accumulated in their personal accounts for their retirement. (Contrast this with the current system, where retirees rely on current workers' payroll taxes.)

Evaluating legislation I introduced last year, the chief actuary of Social Security determined that large accounts would even erase Social Security's $10.4 trillion unfunded liability — what the program promises today's workers but cannot pay. To deal with the "transition costs" of diverting money into private accounts, we should make offsetting cuts in other government spending.

Not only are personal accounts crucial to sustaining Social Security for future generations, they also deliver a much better return on workers' investment. Currently, Social Security delivers a below-market return of 1.5% for beneficiaries. When my children retire, they will receive a negative rate of return. On the other hand, the Thrift Savings Plan — the retirement savings plan that serves federal employees and members of Congress — consistently delivers returns ranging between 4% and 11%, depending on the investment fund chosen. President Bush has mentioned this plan as a model for personal accounts.

So far as I can see, the only people who stand to lose on privatized accounts are Democrats eager to keep spending the money being paid in by younger workers. As I stated before if I were allowed to put 4% of what I poay into a private account and averaged 8% return from now until I retire I would amass a nestegg of over $1 million. One million dollars. Is that enough to retire on? No, but is one million dollars more than I expected to recieve from Social Security. It is important to remember that the plan would be optional. If for some unknown reason a persion did not want to take advantage of the plan, they could continue to draw the 1.5% interest on their money that the normal plan draws and risk receiving nothing after they retire from the bankrupt system.

Please contact you legislators and tell them that you want private accounts, otherwise the politicians in DC will be more than happy to continue to spend your money and leave you with nothing.

Be sure to check the current posts for updates.