Privatizing Social Security

[Gyp Rosetti]

This only becomes a bad thing if we assume providing a welfare net only for those who go broke is a bad thing. I'd take that option every day over providing the net for everyone. Also, there has to be a spender for every saver, so if you take huge risks & lose it will help those who don't. Furthermore, those who swing for the fences & do hit the lottery will be a counterbalancing source of tax revenue to support those who go bust.

Let's look at the numbers. According to the most recent BLS Labor Report, average wages are roughly $42,000 per year. Plug that into a conservative calculation of no real raises per year & 3% real investment returns between the age of 25 & 70, 2% real in retirement, & you'll have a permanent income in today's dollars of $3200 per month until you are 95. Even a 1% real return beats SS by $500 per month.

Compare that to the current average SS payout of $1264 that is scheduled to be reduced by at least 25%. Wouldn't you much rather have the higher income & pay taxes to support those who fail than lower income in an unstable system?

So you're saying that 6.2% of 42K in annual earnings from 25-70, @ 1% interest over the life of that employment, will net someone $1,764 ($500 more than current SS pays out) per SS check? In your scenario that is.

 

[franklin]

I included the employer portion so it's 12.4%, which would actually bump the average pay up to about $44.8K but I was being conservative on purpose. Also, the 1% is in real terms, meaning you earn 5% if inflation averages 4%.



FWIW, I checked to make sure BLS does not include the employer portion in their Average Hourly Earnings definition, and they do not. https://www.bls.gov/web/empsit/cestn1.htm