My Version of Social Security Reform (January 2009)

Social Security is a legalized pyramid/ponzi scheme, similar to what Madoff pulled off for so many years in that new investors are promised a return at a later date as long as they pay into the promised return for the earlier investors. The only difference is that it’s transparent (meaning we know where our money is going), but that doesn’t change the fact that it is what it is. You are unwillingly MADE to invest into the system as soon as you get your first paycheck. (Got to love freedom of choice, huh?) The reason why it shouldn’t fail is because the supply of new investors should always exceed the number of investors before them (following the birth rate models, more born every generation). The problem is that the Government can take from this fund when they see fit, which depletes the amount that is supposed to be supplied to future retirees. Like Madoff, some of the investors are being paid back, but the Government is using that same money ($5 trillion) to fund its own endeavors. Notice the hypocrisy?

I’m putting a suggestion out there, further explaining/expanding how to wean us off of the current system in place.

For right now, we’ll call this program the Personal Retirement Account (PRA). Similar to the Social Security system, the PRA will take a percentage of your paycheck and hold it into a holding account of your choice (IRA, IRA Roth, savings account, etc). The idea is that the money would be “locked” until one’s retirement. One could also designate beneficiaries to this account in case of incident through a personal will or by power of attorney. 100% of your account would be able to be distributed at your discretion instead of being absorbed back into Government.

Key points:

1. The percentage transferred into your PRA is adjustable. As long as you do not go below the pre-determined minimum contribution (more research and discussion needed), you can deposit as much as you’d like into the account
2. Beneficiaries would be designated at your initial introduction into the PRA. This can be changed at anytime (as wills can be adjusted)
3. Government intervention is taken out of the equation. That’s less tax dollars used on enforcing the current system, thus putting the needed tax dollars on more important affairs
4. Distribution among multiple PRA accounts is open for discussion

Those from ages 16 to 25 would take part in a new system where the minimum amount that would normally be taken and placed into the Social Security system, would go into the PRA. Additionally, this age group will no longer contribute into the Social Security system as it’s now fixed.

Age 26 - 39 would get a portion of both the old and new programs (based upon age of course): a portion of the Social Security fund and the PRA program. The Social Security fund would be distributed based upon age in that, the closer you are to retirement, the more of the fund is set aside for your retirement. In addition, you will have your PRA just as the younger age group. Conversely, the further you are from retirement, the more you will have saved in your PRA. There would no longer be any contribution into the Social Security system.

Over time, the current Social Security system would dry up and everyone (after a generation or two) PRAs would have replaced it. It’s Social Security within your personal control.

This takes care of a few things:

1. The government can no longer dip into the Social Security funds that should be set aside for us because there would no longer be a fund to steal from
2. Politics would no longer use this as a means to use fear to obtain the elderly vote
3. The individual citizen can actually see that they have a retirement secured for their future. In addition, there is more of an incentive to work when a citizen can actually see how much one can set aside for the future. (The more you work, the more is set aside for retirement). This may aid in decreasing unemployment and increasing self-drive/motivation
   
4. This may inadvertently replace the burden of life insurance for those that can’t afford it. For those that can afford life insurance, it may become an additional security blanket to go towards beneficiaries

I probably missed something here. Any suggestions, needed additions, questions? I’ll open the floor to you.