Privatization is really a plan to dismantle Social Security

jane doe treasury check
Image: DonkeyHotey via Flickr Creative Commons, https://flic.kr/p/axPTn4

Privatization is not a plan to save Social Security. It is a plan to dismantle Social Security.

That should alarm future retirees, whom the political right is trying to dupe into believing that privatization is the only path forward. Social Security and private investments are two different things. One is income insurance and the other, playing the markets with all the attendant risk.

The two should not be confused, conflated or intermixed — much as some in the administration and Congress would love to see Wall Street get its hands on Americans’ hard-earned Social Security contributions.

In contrast to private retirement funds, traditional Social Security provides a guaranteed income, paying benefits every month for life — with increases for inflation. After adjusting for risk, Social Security has a rate of return equal to that of any mix of financial assets in private accounts. With more than 60 percent of beneficiaries relying on Social Security for at least half their income, it makes no sense to gamble Americans’ future Social Security benefits on the roiling forces of the market.

Instead of providing a secure, defined benefit as Social Security now does, privatizers would encourage workers to gamble a growing percentage of their payroll contributions on private investments. As the proportion of private investment increased, the amount of a worker’s defined Social Security benefit would decrease — until it reached what could only be considered a poverty-level amount. Of course, the worker would reap any gains in the privately invested funds, but would also risk losing some or all of it, leaving little or nothing for retirement.

Read more (CNBC) »

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