How To Privatize Social Security-Part One

Previous posts have outlined how Social Security hurts the poor.  We’ve also shown how, instead, we could be a nation of millionaires.

But what might a privatized account look like?  How would it work?

Here are the  key parts of a Privatized program to which examples in previous posts conform.

1. 1. Payroll withholding is STILL mandatory, no exceptions, just like the current system.
   2. Withheld funds are STILL inaccessible until retirement, just like the current system.
   3. Withholding rates from the current system are retained in the new system at 6.2% for retirement and 1.45% for medical insurance during retirement.
   4. Employee withholdings are FULLY invested in the S&P 500 Index.
   5. The Employer matching portion is FULLY invested in the NASDAQ Composite Index.
   6. The funds are held in a brokerage account in the retiree’s name.
      1. Congress can’t touch it or spend it.
      2. The employee owns the account in full. In the current system, the employee has NO right to any of the funds withheld from their paycheck.
      3. Therefore, the account is inheritable by the employee’s designee.
   7. To be very clear, the employee has NO direct control of the way the withheld funds are managed or invested, just like the current system.  This means NO stock picking or trading. (No Enrons)
   8. Because the system is so simple and the dollar amounts and number of accounts are so vast, fees would be quite minimal.
   9. Distributions from the retirement fund will use the “4%” rule; meaning that no more than 4% of the retirement fund balance may be withdrawn in any year of retirement.
      1. Importantly, this means that the retirement fund will last twenty-five years, until the retiree reaches ninety-one years old.
      2. And the previous point assumes that the retirement fund earns zero after retirement.
      3. To those who are risk averse, the retirement fund can be changed in whole or in part to fixed income instruments.  Even that will extend the time horizon beyond the age of ninety-one years for the retiree.
   10. The accumulated amount generated by the 2.9% currently earmarked for Medicare MUST be used to purchase a catastrophic healthcare plan when retirement begins.

Leave your thoughts and comments below, please.

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