Saturday, November 13, 2004
workers may gain from social security reform
A business column published today in the
North County Times suggests that many single workers, especially those who
have never married, may benefit from partial privatization of social
security inasmuch as they won't forfeit all of their contributions, as
they do now, if they die prior to retirement.
Here is what the columnist, George
Chamberlain, has to say:
The dust is beginning to settle from the presidential elections and that
means the subject of Social Security reform has returned to the headlines.
And, as is always the case, there will be plenty of posturing with little
The argument for privatization ---- giving workers the option to divert a
piece of the contribution into certain stock investments ---- is
compelling. Despite the weakness of the past few years, stocks do go up
more than they go down. Long-term results show that stocks dramatically
outperform all other asset categories.
However, tinkering with the system that was
established as a safety net for retirees is the hottest of political hot
potatoes. Raising taxes, cutting benefits, or suggesting a means test are
all met with serious opposition. Supporting any of those alternatives is
the surest way to end a political career.
I have always been concerned about
privatizing Social Security.
After all, do you
really want Congress to be your stockbroker? And I fret over the idea that
Social Security will become the ultimate retirement savings program. The
conventional wisdom is that it is just one of the three legs on the
retirement planning stool, along with other retirement plans ---- 401(k)s
and IRAs ---- and personal savings.
What has caused me
to waiver a bit in favor of privatization is the idea of equity ownership.
The current system has workers pumping tens of thousands of dollars into
the system without being able to lay claim to any of the money. Heaven
forbid you are unmarried and die at the age of 65, shortly before you are
ready to get your first Social Security check. Too bad. The money you paid
in is not part of your estate and is folded into the government coffers.
What is likely to
emerge from the White House is another proposal to create a universal
saving and investing plan that would allow for tax-free growth. This
account would let all families combine education, retirement and all other
savings programs into one package.
benefits. Tax-free is always better than tax-deferred. This would
encourage people to use the universal accounts in favor of deferred plans
that only pass the tax burden on to your survivors.
And consider the
economy of one universal account. Think about a family with three kids. If
each of them has a savings account or 529 plan, each of the parents has an
IRA and they put money into the retirement plan at work, they are paying
out hundreds of dollars each and every year just in custodial fees, never
mind commissions and other costs.
And, unlike Social
Security, this account would be a personal asset, part of a legacy to be
passed on to future generations.
It is time for
Americans to step up and take responsibility for the financial future.
Social Security was never meant to be the be-all and end-all retirement
plan. Sure, some people think spending money is more fun than saving and
investing it. But, it's about time to get our priorities squared away.