In 1950, there were 16 workers to support every one beneficiary of Social Security. Today, there are only 3.3 workers supporting every Social Security beneficiary. By the time today’s young workers begin to retire there will only be 2 workers to support every recipient. Under the current system, today's 30-year-old worker will face a 26% benefit cut when he or she reaches normal retirement age.
To keep the current social security system as it stands is to ensure a grim financial future for retirees. A sure fire way around this is to allow citizens who so choose to create personal savings accounts invested in the stock market. Over the past 17 years the stock market has produced an average 12% gain, certainly better than the 26% loss the current system will provide.
Personal savings accounts will guarantee today’s young workers not only security in retirement, but prosperity. A twenty-year old male can expect to pay $418, 517 in Social Security taxes over his working life. He can expect to receive $2, 734 in monthly Social Security benefits when he retires, amounting to a pathetic -0.95% rate of return.
However, if that twenty-year old male had been allowed to place all of his Social Security taxes in a personal savings account he would have a total of $1,192,881 in accrued wealth at retirement. Monthly benefits would end up being $9,717, or $6,983 more a month than he would receive under the current Social Security system.
At the very least, the federal government must stop spending the annual Social Security surplus on programs and expenditures completely unrelated to Social Security. That surplus should either be saved for the day when the current Social Security program is no longer solvent or, as we propose, it should be returned to those who pay into the system via the Social Security tax for a smaller personal savings account, which would compliment the regular Social Security benefits they would receive upon retirement in the current system.
* Co-authored with Chris Allen, Policy Advisor, PLU GOP.
No comments:
Post a Comment