Thursday, November 20, 2008


Michael Tanner, Cato Institute, 1996 - Critics of Social Security privatization often warn that such proposals hold serious dangers for the elderly poor. However, a closer examination of the evidence indicates that the poor would be among those who would gain most from the privatization of Social Security.

By providing a much higher rate of return, privatization would raise the incomes of those elderly retirees who are most in need. . .

As envisioned by most supporters, a privatized Social Security system would essentially be a mandatory savings program. The 10.52 percent payroll tax that is the combined employer-employee contribution to the Old-Age and Survivors Insurance portion of the Social Security program would be deposited in a personal security account chosen by the individual employee. . .

PRAs would operate much like current Individual Retirement Accounts (IRAs) or 401(k) accounts. Individuals could not withdraw funds from their PSAs before retirement, determined either by age or by PSA balance requirements. PSA funds would be the property of the individual, and upon death, any remaining funds would become part of the individual's estate.

PSAs would be managed by the private investment industry in the same way 401 (k) plans and IRAs are. Individuals would be free to choose the fund manager that best met their individual needs and could change managers whenever they wished. The government would establish regulations on portfolio risk to prevent excessive speculation and protect consumers. . .


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