In his State of the Union Address, President Bush said that the Social Security system is headed for "bankruptcy," He also made his proposal on private Social Security accounts. What the president proposed sound like a good idea, but in fact they violate the rules and are not following the current facts.
The president said: "In addition, you'll be able to pass along the money that accumulates in your personal account, if you wish, to your children and -- or grandchildren. And best of all, the money in the account is yours, and the government can never take it away." However, this is not true. As described by the Senior Administration Official, the owners of personal accounts wouldn't be able to touch the money while they are working, not even to borrow. The money would remain in the hands of the federal government...They would be permitted to leave those (leftover) funds in the account to continue to appreciate; they could withdraw those amounts as lump sums to deal with a pressing financial need...But
the main restriction, again, to repeat, is that people would not be permitted to withdraw money from the accounts to such a degree that by doing so they would spend themselves below the poverty line.
The president also said: "Here's why the personal accounts are a better deal. Your money will grow, over time, at a greater rate than anything the current system can deliver -- and your account will provide money for retirement over and above the check you will receive from Social Security." In truth, putting your money into the current Social Security program is a riskier proposition than investing in the private equity markets because Social Security is heading toward bankruptcy, which is what the president said, and cannot pay promised benefits. Without action...