Reading over Dave’s blog this morning I realized that I have not done a sound off regarding another important issue of our time – Social Security. My ideas in this area are fairly simple but certainly not necessarily original by any means.
Anyway, here is what I think about Social Security.
The Social Security system as it stands in the United States now is an idea whose time has long since past. This system created in the 30s by President Franklin Roosevelt, while great in theory, and is now one of the most popular government programs in existence. However, it is a program that quite simply needs help.
First an overview, Social Security is basically a program where money is taken out of your paycheck every pay period in order to provide for your retirement once you have reached the age of 65 and no longer are employed.
So looking over my paycheck, it appears that roughly 6% of it goes toward Social Security. Interestingly enough, another 6% of my pay goes into a 401K account, however that is a voluntary deduction.
Most places of employment these days offer some kind of 401K savings program and in most cases will match whatever you contribute to the account. And in addition, in most cases, if you leave your job, you can take whatever has already been contributed and transfer it to a 401K account at your new job. In any case, let’s say you work for 40+ years, always contributing to your 401K, never withdrawing or taking a loan from said account. This money should be more than sufficient to provide for a comfortable retirement. Not to mention even that most jobs will give you some sort of retirement/pension check if you’ve worked there long enough when you retire.
So let’s say that Social Security is dissolved. You can take that 6% that you are putting into it now and do one of two things. You can put it into your 401K account, therefore having even more money saved once you’ve retired. Or, you can pocket that money, still having your 401K account when you retire, and still live fairly comfortable when you do.
But wait. What if I don’t have a 401K account. Well, if you could stop paying Uncle Sam to provide retirement checks, you chould use that money to start one.
The point being, the system is not working. The money is not being used for what it was intended for. It is being used to fund projects that have nothing to do with social security, or the elderly, or retirement.
So my proposal than is (unless someone can come up with a better plan or if they can keep the federal government OUT of the social security coffers to fund their own projects) to completely do away with the social security system in favor of a voluntary retirement savings plan, much like the 401K program. You only put money in when you want to. You only have the amount taken from your paycheck that you want to. It’s simple.
Of course, even with the simplest solutions there are problems. But the only problem I can really forsee with this particular type of reform is how it will affect the people currently on social security. How will we provide for these folks? They already did their time by having their money put aside in social security to provide for their futures. This of course presents a problem. If we completely did away with social security, would these people be left in the cold? Unfortunately on this issue, I am mostly part of the problem and not part of the solution. I have to be honest here, I am drawing a blank. Although I hate the way the social security system is being run and would rather it go away, I am certainly not in favor of withdrawing these people’s benefits. The only thing I can really think of is to take the money already in the system for social security and put it into some sort of mutual fund, or high-interest bearing savings account of some sort and use that for the current users of social security. I dunno, that’s the best I could come up with.
Anyway, that is what I think. Any thoughts?