|President Bush and his advocates tell the American people that Social Security is in trouble. But not all Americans believe them. For several decades, Social Security has become one of the most popular and essential programs of the federal government. Basically, one out of five Americans receives Social Security benefits and ninety-five percent of Americans have the Social Security benefit protection program. Additionally, forty-two percent of senior citizens in America are kept from poverty by their Social Security benefits. Social Security is still the foundation of older workersâ retirement. More than any government program, Social Security has continuously given the Americans what it was designed to do.
In Bushâs State of the Union Address, he campaigned for the privatization of Social Security claiming that the system would be bankrupt in 2042. Given this claim that Social Security is in crisis, there are still a lot of drawbacks that needs to be considered before privatization can be implemented. To cite a few:
The privatization drive necessities the replacement of all or part of the current Social Security system with a program of individual retirement accounts. This concept would divert funds from Social Security into individually owned accounts. As a result, investment is transferred from a group of workers to the individual. Instead of spreading the risk throughout the workforce privatizing places the entire risk of having a decent retirement income on the individual.
Advocates of this plan say that individual investment accounts to save for their retirement. But what they fail to say is that these individual accounts would be financed by taking money out of the current Social Security system. Hence, privatization would take out money from the Trust Fund.
Private accounts will cost more to run. Although proponents of privatization assert that the program would be more cost effective and efficient, in reality it is much cheaper to run the current Social Security having only less than one percent of income revenues.
Even though privatization advocates claims that the program will not affect current or near retirees, privatization would put a great risk to everyoneâs benefits. Social Security will run out of money if the program is privatized as so much money will be taken out of the Trust Fund.
Great risk is at stake in investing in private accounts as no one can foresee what will happen to the stock market in the future. If the market suddenly drops after you retire, you could expect to see that the value of your assets will also drop significantly leaving you with less retirement income than you have planned for.
Given this drawbacks, it is clear that privatization would greatly impact not only those individuals nearing their retirement age today but also future workers. The fate of Social Security lies in what the American decision makers will do today. Hence, no matter what happens with the program it must always be designed to meet the objective to which it was established for â that is to provide retired individuals a secure income for as long as they live.