Special social security accounts provide a way to reform
Social security is broken. The program has operated a deficit for many years and will continue to do so indefinitely. The so -called “the renovation fund” is nothing more than IUS from the federal government and will be exhausted in late 2032, and the long -term non -dollars rivalries. It is not possible to touch politicians who insist that social security does not protect the elderly. They are moving, and when the “insurance box” is exhausted, there will be 24 percent of the discounts in the council unless something is done to fix the problem.
It is no longer possible to consider the “third railway” system and must be repaired forever.
For decades, Washington stumbled on the edges by raising taxes such as salary statements and raising retirement age. None of this basic defect in social security has resolved, meaning that it is a payment scheme. The current workers pay the current retirees, and nothing is assembled to pay the current workers. With fewer workers who support more retirees, mathematics simply no longer work.
There is a better way, I have worked in many countries around the world, private retirement accounts. Instead of sending their salary taxes to a disrupted government system and getting worse, workers will invest those contributions to their own accounts, which are being managed professionally, and double in time over time. Upon retirement, this nest belongs to them, not to the government. When they explode, the remaining origins will go to their heirs, and build the wealth of generations instead of disappearing in the black hole of Washington.
There are many advantages for privatization. Special accounts are assets owned by the individual, providing an increase in retirement income, enhancing economic growth through investment, and eliminating the non -funded government responsibility. Workers can contribute more if they choose, employers can match additional savings, and the program will be permanently sustainable.
The challenge is the transition. The transition from the broken payment system to the fully funded special account form requires a large capital. We must maintain payments for the current recipient, so redirecting contributions to private accounts leaves a financing gap for the current retirees. This deficiency must be covered fairly and responsible during the transition.
A 20 -year concerter plan has identified the way forward with a gradual shift into special accounts so that all contributions are included in special accounts in the twentieth year. The current retirees will keep their advantages, while new retirees will get a mixture of social security batches and disburse the private account until the private accounts cover their entire retirement. The temporary deficiency will be covered with three sources: contributions to salary statements, modestly higher than employees, employers and government. These would be sunset as soon as the insurance box is not needed.
Yes, there will be transitional costs and modifications. But when the conversion is complete, retirees will be better, and will disappear unprofible, and the program will be finally sustainable.
The numbers show the importance of this. The worker who invests the contribution of social security is 12.2 percent for the current period of 40 years, exacerbates even by 5 percent, will retire with much more income than social security today. Retirement age will become unrelated, because individuals can get benefits whenever their savings reach minimal minimum – for most people who will be 67 years old. Unlike social security, their accounts will be real origins that they possess and control.
The biggest image is realistic. The collapse of social security is only one part of the financial crisis that waves on the horizon in America. With debts of approximately 125 percent of GDP, and the annual multi -produced deficit forever, expectations show debts that are heading about 200 percent of GDP in the coming decades, we are in a collision with reality. Social security is not the entire problem, but it is a decisive piece of the solution.
What is missing is general support for a major change like this. Previous attempts to privatize failed not because the economy was not sound, but because the plans were not fully considered or sold clearly or backed widely. Groups such as Aarp, which claims to talk about the elderly, should stop preventing reform and start defending solutions that protect retired future.
The current social security program is a financial disaster. Protecting otherwise is a dangerous illusion. We can fix it with a real plan, over time, through special accounts. This path is not easy, but it is fair, sustainable, durable and better for all parties.
The choice is between adhering to the Bonzi scheme that collapses in front of our eyes or building a retirement system that works for the elderly today, for workers tomorrow and the future of America.
Les Robin is a founder and president Main street economics.
