NOTE: Free essay sample provided on this page should be used for references or sample purposes only. The sample essay is available to anyone, so any direct quoting without mentioning the source will be considered plagiarism by schools, colleges and universities that use plagiarism detection software. To get a completely brand-new, plagiarism-free essay, please use our essay writing service.
One click instant price quote
Social Security Reform Must Incorporate Stock Market Investments Imagine you re 65, have made a decent living, and are looking forward to an enjoyable retirement with the help of social security. You have taken care of yourself to insure a healthy life beyond retirement and as a reward, the government is going to turn around and withhold your benefits an additional five years because social security cannot afford to pay you. But you are not surprised. You realized 35 years ago social security was in trouble and knew you would only receive a low monthly benefit. So you started your own savings plan for retirement. Right?
You did start one didn t you? Everyone agrees something needs to be done about Social Security, but no one can agree on how to save it. I am a firm believer in investing a portion of your income in the stock market to beat inflation and to have something extra when you retire or when you decide you need it. However, with so much already being withheld from our paychecks for social security it is difficult for many to find the extra money. The Federal system of social security strives to have money for you when you retire. But, with a system based on the demographics of a time period when retirees made up less than a quarter of the population its only flexibility is in its taxes collected, benefits awarded, and age of retirement.
Therefore, with baby boomer retirees due to make up about one third of the population and the national life expectancy increasing, more retirees are paid longer while supported by a smaller working population. Robert Myers, chief actuary for the social security Administration from 1947 - 1970 and deputy commissioner of Social Security from 1981 - 1982 states in a December 1996 Challenge issue that the full-benefit retirement age (now 65) will be extended to age 67 by the year 2027 and to age 70 by the year 2037. There is no doubt this system is destined to fail if no significant changes are made. The current FICA rate withheld from your paycheck is 6. 2 %, coupled with a matching 6. 2 % sent in by your employer, equals a whopping 12. 4 % credited by the social security administration to your personal account. Social Security is shaky precisely because when the tax is collected, instead of going into an actual account it is immediately paid out to current beneficiaries.
Any surplus is promptly spent by the government on other programs. The benefits that I receive from this system when I retire will depend on the workers of tomorrow unless we do something to fix this problem today. According to a January 1997 issue of U. S. News and World Reports, a thirteen member advisory council spent nearly three years debating ways to shore up social security s dwindling finances. In a quote from a February 1997 issue of Forbes magazine, author Steve Forbes states, All we ve seen from this advisory team thus far is benefit cuts and higher taxes.
These approaches for reform fall into the zero-sum, pay-as-you-go mentality that has led us to the mess we are in today. Serious reform to social security will have to include a transition to a completely new system, rather than patching up a weak system which only makes it worth less with each fix. It makes sense to start over, eliminating the fundamental problems of the old. This is where the stock market comes in, resulting in a system that reduces payroll tax and, when you retire, pays you everything you and your employer contributed plus some. This system only needs approximately 5 % taxed from payroll. It will spread your contribution amount over an arsenal of government chosen investments in an overall seek for higher returns utilizing the safety of diversification.
The owner has the option to choose between the various investments the government has decided upon. If the owner opts, however, the government can chose the investment machines for them. Whenever the stock market is considered, safety becomes an issue. That is why your employer s matching 5 % contribution will automatically be sent to a government controlled safety account, using a variety of low-risk investments such as bonds and money market accounts.
This will guarantee a level of safety equal to today s system but with higher returns. In addition to these accounts, if a person is currently enrolled in a 401 (k) plan through his or her employer, they have the option to contribute their 5 % payroll tax towards this account instead. Thus minimizing the administration costs necessary for a government investment board and utilizing the secure infrastructure already in place. The overall benefit of this new system would be an increase in the national savings rate due to higher returns for lower payroll deductions.
Investing our retirement deductions makes sense. An investment plan that gives back more than you put in is rewarding and will restore faith in the national retirement system. It will also instill intrinsic motivation to learn basic investing at an early age. With this in mind, people will be more likely to invest money of their own. I know I would be encouraged to make some riskier investments of my own knowing that there will be something to fall back on if I need it.
Free research essays on topics related to: payroll tax, higher returns, social security, makes sense, stock market
Research essay sample on Social Security Higher Returns
