Social Investing Money - Essay Example

?People Who Contribute to Social Security Should Have the Right to Choose How Their Money is Invested Living in these uncertain times, when money is tight and penny pinching is the order of the day, when the country faces a fiscal cliff, and our savings accounts and other investments are basically equivalent to worthless stock, it is important for people to take a step back and study their various remaining options when it comes to their retirements benefits. One of these benefits as promised by the government is a pension after reaching the mandatory retirement age. The government agency tasked for this specific purpose is the Social Security Administration. The system is currently in a status wherein it somehow manages to pay off its financial obligations to its members however, the money being disbursed is not equivalent to the lifelong contributions that the members have been making. Neither is social security a financially secure program as the office itself has a problem collating funds in order to fund itself. The program is basically bankrupt. Knowing that social security is in dire straights due to the U.S. economy, one cannot help but wonder, maybe the system will be better off if it is privatized and the members are given the opportunity to invest the money they contribute to the system themselves? With the annual return of social security contributions pegged at about 1.2. % this means that is has the lowest ROI prediction of all the retirement investments of an individual. The expected ROI from the stock market averages 6.34 %. As such, if a social security account is converted into a private account, the FICA taxes could give a maximum return on the investment upon the retirement of the member. The social security system would then actually be in a position to help supplement the retirees income in a significant manner. (“Should Social Security be Privatized?”). It is easy to understand why most people would see the wisdom in turning over their social security contributions from the government to a personal account instead. The government the government liability in this particular area is higher than what was previously estimated and has exposed them to a $20 trillion liability to the system members. If the social security accounts were privatized by allowing individuals to have their own private accounts, the member will be able to maximize the full potential of his membership with the system. Keep in mind that when the Social Security Act was set into place by congress back in 1935, Pres. Franklin Roosevelt signed a document that merely stated that the program would provide old-age benefits for its members. This was amended in 1956 to include disability benefits for its members (Agresti James, & Cordone Stephen “Social Security Facts”). The structure by which the program is created shows that the system is not in the control of the members, but rather in the hands of politicians who have the ability to format and reformat the program as they deem fit. To be clear (Tamny, John, “The Ugly Truth About Social Security is Revealed”): ... the money we pay into Social Security is not ours, meaning politicians can reduce or confiscate the dollars withheld from our paychecks as they see fit. They can also reduce our retirement by simply raising the retirement age. And then as evidenced by the collapse of the dollar since 2001 (a dollar in ’01 bought 1/250th of an ounce of gold, today it buys 1/1600th), another way they can eviscerate their obligations is to debase the dollars they are presumed to owe. Our politicians are not currently in the position to invest our hard earned dollars in any system that is meant to help alleviate the lives of the people. It was too much governance in the financial aspect of individual lives that brought us to this point in this first place. The government has shown us that they cannot even work together to put together a cohesive budget for our country, how can we trust them to develop a cohesive investment plan for the future and current retirees of this country? I would not trust a banker whose bank I know is teetering on the verge of collapse, I would take my money and run. Jim Horney of the Center on Budget Priorities helps us further understand the frustrating position of the retirees when it comes to their social security benefits. He explains that (Tamny, John, “The Ugly Truth About Social Security is Revealed”): “... Social Security should not be counted as part of the U.S. budget deficit. It shouldn’t because Congress can alter its liabilities by reducing benefits or raising taxes. Or, as Horney more bluntly put it, “Retirement programs are not legal obligations.” If the U.S. government cannot be held to its promise to help the system financially in the future because of the arbitrary way their involvement in the program is set up, then, just like any disinterested investor, they should divest themselves of their stock and let people with a personal interest in seeing the system viable and functioning run the program instead. The social security program was never meant to be a milking cow for politicians who can safely ignore the instability of the program until the next election season approaches. The employee and employer share of the Social Security contributions totals about 15.3 % of each person's income tax. Half of that amount is shouldered squarely by your employer.(“Why Social Security Should be Privatized”). Such a steep responsibility on the part of the employer has a direct impact on his business and your job. The government merely disburses the money as it sees fit to the members, regardless of the amount of contributions the employer and employee has made to the system. There is an earning bracket involved and everyone will get the same amount as mandated. But in a private scheme, or by allowing the individual to invest his social security contribution in an investment scheme of his choice, the member will then be able to reap the benefits of membership in the system. As important as returning control of the social security program to the members is an important part of making sure that the system survives in order to fulfill its obligations to the members well into the next century, there are still those who feel that the program is effective in its current form. Therefore they believe that the system does not need fixing nor turning over to the private sector. After all the program is voluntary and allowing the private sector to run the program or allowing people with very little knowledge of how the program should actually work could prove detrimental to all the members of the system. Most American retirees see the Social Security program as one of the retirement programs that they can rely on in their old age because they worked hard to save that money and the government kept it in safe hands for them. They believe that a privatized social security, or a system that allows the individuals to invest their social security on a personal basis would mean that the system can no longer be depended upon by its members. They believe that it is important to differentiate between a government back retirement program and a private pension program. Any lack of government oversight in the program in their opinion, would prove to be detrimental to the members who will then be prone to the greediness of the private business sector. This considering that the individual social security investments would be turned over to the very same people who caused the Wall Street crash in 2008. There does not seem to be any sound business sense in such an investment on that basis according to the mindset of those against the privatization or allowing individuals to invest their social security contributions (“Should Social Security be Privatized?”). The mandate of the social security in terms of government responsibility is hidden in a shroud of gray. In 1960, the U.S. Supreme Court decided that Americans do not have any ownership rights over the money they pay into social security. According to experts such as Edward Crane (“It's Your Money”) explains the horrific reality that is our Social Security program: The federal government has no contractual obligation of any kind. What you get back—and, indeed, the age at which you qualify to receive benefits—is entirely up to the 535 men and women in Congress. That is simply wrong. It is your money. You work hard for it. You should own it. We are looking at the declining future of a government program that relies solely on the contributions of its members to survive. Not only that, but the social security program has proven to be a milking cow for the government as they are assured of mandatory loans from the system whenever there is a surplus in its earnings. This is what has resulted in the trillion dollar debt that the government currently owes the system (“Should Social Security be Privatized?”). The idea behind an individualized social security program is really quite simple and easy to implement. The explanation goes this way (“The Social Security (?) System”): The idea is that taxpayers would have the option to determine how some or all of the money they contribute to Social Security may be placed in savings accounts or invested in order to enhance their “portfolio,” in much the same way as investing in the stock market. This is the ultimate form of “privatization.” Personal account social security investments would allow the members to independently benefit from the amount that they actually contribute to the system. Sans the payment bracket of the government that proves to be ill effective in meeting the financial demands of an aging population. This method would prevent the government from re-allocating the much needed retirement funds from the system towards some other bridge to nowhere project. The Cato Institute believes that the personal account system for social security cannot fail (“The Social Security (?) System”) mainly because: Personal retirement accounts would give each worker genuine property rights to his or her retirement savings. The money that goes into a PRA goes straight from your paycheck into an account that you own. It's not a promise; it's property. Instead of paying taxes for missiles and mohair, you get a tax cut that allows you to save and invest for your own retirement. And because what you save is yours by right, you can, unlike Social Security, pass it on to your loved ones when you die. With PRAs, you literally own the source of your retirement security, and it cannot be held hostage, whittled down, or bargained away by future Congresses. The Private Retirement Account seems to hold all the answers to the current problems besetting the Social Security program of our nation. As a democracy, it is important for our country to give its citizens options when it comes to the hard earned money that they contribute to the system. Allowing them the PRA option would be a good start towards that goal. After all, it is not the system's money, it is not the government's money, but the money of the members -- the American people that has to be invested. Nobody can invest that hard earned money better than the people who hope to reap benefits from those investments in the future. Works Cited Agresti, James & Cardone, Stephen. “Social Security Facts”. Social Security. Just Facts. 16 Oct. 2012. Web. 19 Nov. 2012. “It's Your Money”. Cato Institute. Cato Institute. 2005. Web. 21 Nov. 2012. James. “Why Social Security Should be Privatized”. NC Renegade. N.C Renegade. 19 Oct. 2011. Web. 20 Nov. 2012 “Should Social Security be Privatized?”. Politics and Opinions. Debate.org. n.d. Web. 20 Nov. 2012. Tamny, John. “The Ugly Truth About Social Security is Revealed”. Forbes. Forbes. 3 Jun. 2012. Web. 19 Nov. 2012. “The Social Security (?) System”. ApatheticVoter.com. theapatheticvoter.com. n.d.Web. 19 Nov. 2012. Read More