Social Security Personal Accounts Too Risky
By Mark Mills
I’m an investor. I’m optimistic about the future of the U.S. economy and the financial markets. But I’m against personal accounts for social security.
Growing up, I was taught to think of retirement planning as a three-legged stool: social security, pension and personal savings. Social security would be a guaranteed government benefit. Pensions would be provided by employers based on a worker’s pay and years of service. Personal savings would round out the package to provide a comfortable nest egg in the golden years. That old stool is looking pretty wobbly these days.
For millions of U.S. workers one of those legs, the pension, has been turned into a personal savings vehicle, the 401(k). That has already transferred risk and cost from corporations to individuals. The personal savings leg of the stool always carried market risk, as well as the possibility people would be unable to accumulate significant savings over a lifetime.
Now, we are going for the trifecta. Personal accounts would shift even more risk onto individuals. As we saw from 2000 to 2002, the volatility of the financial markets can be devastating. Anyone with the misfortune to be retiring as we enter one these market meltdowns would have his or her retirement prospects dramatically reduced with very little time to recoup losses in the following upturn. I realize that risk can be managed, but it cannot be eliminated. And last time I checked, bonds, the more conservative investments in a portfolio, can also drop sharply in value.
Recently, I received my annual statement from social security specifying my projected benefits. It was reassuring to look at those numbers and see that I am due a guaranteed benefit based on a lifetime of putting money into the system. If society keeps its pledge, that money will be there regardless of any future Black Mondays, Enron scandals or technology bubbles. I cannot say the same for my 401(k).
Let’s find the ways to fix social security. From adjusting how benefits are calculated to raising the ceiling on wages that are subject to the payroll tax, many alternatives are available to put social security on a sound footing for generations to come.
From homeland security alerts to mass layoffs following corporate mergers the world feels much less secure these days. Let’s keep a system that has lived up to its name: Social Security.
I’m an investor. I’m optimistic about the future of the U.S. economy and the financial markets. But I’m against personal accounts for social security.
Growing up, I was taught to think of retirement planning as a three-legged stool: social security, pension and personal savings. Social security would be a guaranteed government benefit. Pensions would be provided by employers based on a worker’s pay and years of service. Personal savings would round out the package to provide a comfortable nest egg in the golden years. That old stool is looking pretty wobbly these days.
For millions of U.S. workers one of those legs, the pension, has been turned into a personal savings vehicle, the 401(k). That has already transferred risk and cost from corporations to individuals. The personal savings leg of the stool always carried market risk, as well as the possibility people would be unable to accumulate significant savings over a lifetime.
Now, we are going for the trifecta. Personal accounts would shift even more risk onto individuals. As we saw from 2000 to 2002, the volatility of the financial markets can be devastating. Anyone with the misfortune to be retiring as we enter one these market meltdowns would have his or her retirement prospects dramatically reduced with very little time to recoup losses in the following upturn. I realize that risk can be managed, but it cannot be eliminated. And last time I checked, bonds, the more conservative investments in a portfolio, can also drop sharply in value.
Recently, I received my annual statement from social security specifying my projected benefits. It was reassuring to look at those numbers and see that I am due a guaranteed benefit based on a lifetime of putting money into the system. If society keeps its pledge, that money will be there regardless of any future Black Mondays, Enron scandals or technology bubbles. I cannot say the same for my 401(k).
Let’s find the ways to fix social security. From adjusting how benefits are calculated to raising the ceiling on wages that are subject to the payroll tax, many alternatives are available to put social security on a sound footing for generations to come.
From homeland security alerts to mass layoffs following corporate mergers the world feels much less secure these days. Let’s keep a system that has lived up to its name: Social Security.
posted at 12:04 PM
3 Comments:
I can see how older workers would feel about changing a system that has worked. But many younger people don't beleive the system will be there for them. So they might as well take their chances with the market and have a shot at a good retirement account.
When Social Security was set up, you were supposed to die before collecting any - go back and look at the stats when the legislation was enacted....
Give us young folks a chance.
hentai transexuelle poilues X@X lesbienne jupe relevee X@X chattes fesses amateurs X@X penetration chaude amateurs X@X geladarisa video X@X geladarisa video X@X geladarisa ikones X@X geladarisa ikonidio X@X zesto potho kori X@X pio zesto potho kori X@X to pio zesto potho kori X@X potho gimnos X@X
Post a Comment
Back to blog main page