Social Cecurity Privatization

Essay by PaperNerd ContributorUniversity, Master's September 2001

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Social Security Privatization The Social Security System must be modernized to fit the social, demographic, and economic changes that America is currently undergoing. It is best to move towards a system of privately invested, individually owned accounts. This idea, known as privati tion, has become one of the most controversial issues talked about today.

Social Security was never intended to be an absolute investment for retirement. The current social security system reduces the amount of money that people can save for their retirement. It is thought of as a pay-as-you-go system, in which the required yments collected by social security are immediately used to pay benefits to current retirees. The first generations benefit from this system the most, while the later generations are penalized. This problem has been made worse by recent demographic chan s. As more workers are retiring and life expectancy increases, the worker-to-beneficiary ratio is declining. This means that working individuals are having to pay higher taxes to support retirees.

The traditional way to tend to these problems was to rai taxes, the difficulty with this is that if taxes rates continue to increase, they may soon become unbearable. Conservative's plans to privatize social security seems to be the most logical answer to this apparent crisis.

A rate of return is the amount of money that an individual receives from an investment. Generally, one would receive a better rate of return investing privately than through social security. If an individual was to place a sum of money in a stock marke fund, and that fund increased, the rate of return for that person would be the money accumulated from the stock increase. This is a favorable method used in retirement, because if the working individual continues to invest wisely, his initial sum of mon will quickly multiply.