Privatization The Better Choice Essay Research Paper

Privatization: The Better Choice Every working American citizen contributes to Social Security. Anyone who has ever held a job has felt the frustration of seeing how much money the government takes out of their paycheck. Being told that we will all be able to collect social security when we can no longer work does not ease the frustration of having 6.2% of our hard earned money taken from us each payday. If individuals could have control of their retirement funds, this frustration could be eased. Being able to control our own retirement funds is an option that is being supported more and more by American workers. Currently, nearly 44 million Americans receive Social Security benefits. Of these 44 million, 61% are retired workers, 17% are survivors of deceased workers, 12% are spouses and children of retired workers, and 10% are disabled workers. Obviously, the major group of Social Security Beneficiaries is retired workers. Since the number of working Americans has not grown along with the number who are retiring, Social Security has become a black hole to the current generation of workers. We will pay into it most of our lives, but will not be able to collect unless a drastic change is made. Everyone has heard the ongoing debate over the past few years about what should be done to reform Social Security. The Social Security Board of Trustees estimates that by the year 2032, Social Security funds will be fully spent. There are several reasons for this, including the retirement of the ?baby boom? generation and the assumption that the U.S. economy will grow at a slower rate than it has been. While republicans and democrats fight over whose plan is better, there is a simple alternative to Social Security: privatization. By making social security a private matter for individuals, everyone can benefit. One of the plans the government is considering includes partial privatization, but it is still centered around a flat tax deducted from the paychecks of American workers. The idea of Social Security is a good one. There are many retired workers who would not make it without Social Security. I have seen it myself. My mother has been in banking for more than 20 years, and during that time I have seen all kinds of people coming in to deposit their Social Security checks. The majority of them are middle class, retired workers, and although their Social Security checks are not their only source of income, the little bit of extra money does help them. Others, however, would not be able to put a roof over their heads without their Social Security. Even though it may not seem like much to most of us, that little bit of money is all they have, and they depend on it. A private system, however, would give retired workers a greater chance at having more money upon retirement. By investing into mutual funds or other low-risk investment programs, people could get a greater return on their money. Even with a private system, Social Security should still be mandatory. If people were concerned enough to plan for their retirement, they would already be investing or saving money for that purpose. Since many people have trouble saving money or do not feel they can afford to set money aside, a privatized savings system should still be mandatory, perhaps even with a set amount to be withheld from each paycheck. The difference between this idea and the existing Social Security program is that individuals would be in control of where and how their money is invested. Workers who do not care to make investment choices for themselves would still accumulate funds for their retirement, while those who choose to do so are choosing how they want their money to be invested, and possibly yielding greater returns. Many Americans would agree that helping our fellow citizens in their time of need is part of the American way; however, with the current Social Security program falling apart, the best way to secure the future of young workers is a system in which they can invest for themselves. A mandatory private savings account system would benefit everyone. The current SSI paycheck deductions are not only a frustration, but they distort the compensation sought by employees and reduce national savings and investment. Privatization would allow individuals to invest in the economy through the Stock Exchange and bonds. Not only would privatization allow individuals to secure their future well-being, but it would also boost our economy. Imagine if on every payday everyone was investing, pouring money into the economy. This would be a huge boost in economic growth. In May of 1981, Chile?s government-run-pay-as-you-go retirement system was replaced with an investment based private system. This new system has been extremely successful, and has been the perfect intervention to the problem the old system faced, which was fewer workers having to pay the retirement benefits for more retirees. Chile has created a system which gives retirement investment rights to the people, which enhances not only economic growth, but personal freedom and dignity as well. According to Jacobo Rodriguez of the Project on Global Economic Liberty at the Cato institute, more than 95% of Chilean workers have their own personal savings accounts, assets have grown to more than $34 billion, and the average real rate of return has been approximately 11.3% per year, which has allowed workers to retire with better and more secure pensions. According to the Washington Times, a huge majority of Americans support the idea of Social Security privatization. The general population feels that they would benefit financially by having control of their own retirement funds, and they are right. A private system would give an average compound return of at least 7% annually, leaving sizeable retirement nest eggs much larger than the pea sized amounts that Social Security pays. Currently in San Diego, California and Galveston, Texas, there are about 9,500 city employees who escaped Social Security before all laws were set in stone. The Galveston employees, with a very conservative, low-risk investment program, have great retirement benefits. The San Diego employees have greater freedom to invest. They can choose between low risk securities and among four mutual funds. Since 1996, they have received an average annual rate of return of more than 14%. There are some who would argue that too many people might make poor investment choices, and end up going to the government for assistance upon retirement. There is no sure guarantee that this would never happen; however, this has not happened in Chile, Galveston, or San Diego. The purposes of mutual funds is to make a profit with very little risk. By investing into these and other low-risk programs, there is very little chance of people making poor choices that leave them with nothing. The simple fact is that privately owned retirement accounts would produce an income much greater than Social Security provides, and we wouldn?t have to face the problem of running out of money. Real life programs like the ones in Chile, Galveston, and San Diego show how successful Social Security privatization can and would be if only the government would give us the freedom to choose how to protect our future. The current system has failed. It?s just a matter of time until Social Security is bankrupt. It is time for the government to let the people decide how to provide for their own futures.