Why Some People Are Talking About Privatizing Social Security
Social Security faces an uncertain future. The trust fund is dwindling and, if nothing is done, the agency could be forced to slash benefits within the next 10 years. According to CNBC, this is one of the reasons that the talk of privatizing the program is gaining traction. But what exactly does that mean?
Social Security is a pay-as-you-go system: the payroll taxes paid by today’s workers fund benefit payments made to current retirees. Social Security’s assets are kept in a trust fund. That money is invested in special Treasury bonds that earn a market rate of interest guaranteed by the government. This leaves little room for growth. That’s why many people are promoting the idea of privatizing the program. According to the article, “this could provide a way to invest money on behalf of individual workers that potentially earns a higher return.”
Of course, this idea has its risks. Depending upon the market, investments could tank. That’s what happened back in 2008. When the stock market dropped, so did many people’s 401(k) retirement accounts — but Social Security never missed a payment.
The Seniors Trust is committed to strengthening the Social Security program. We are strong supporters of The Social Security Expansion Act. This landmark piece of legislation will give retirees an immediate benefits increase of about $200 a month, a fair annual cost-of-living adjustment (COLA), increased minimum benefits, and will ensure the long-term solvency of the Social Security program.
