When it comes to privatizing social security there are a few things that you should know. The advocates of privatizing have good reason for their suggestion and they should not be so easily dismissed but they should be asked to explain a few things before assuming that just because of who they are, they know more than the common man/woman on the street about it. With everything there are risks and rewards, the object is to make sure that the rewards far outweigh the risks but in order to accomplish this, you need to be aware of all of them. This article will not cover all of them but it should offer you a starting place to begin the search.
“The conservative position is often pro-privatization.” “There are countries other than the U.S. that have set up individual accounts for individual workers, which allow workers leeway in decisions about the securities in which their accounts are invested, which pay workers after retirement through annuities funded by the individual accounts, and which allow the funds to be inherited by the workers’ heirs.” “Such systems are referred to as ‘privatized.’ “Currently, the United Kingdom, Sweden, and Chile are the most frequently cited examples of privatized systems.” “In the United States in the late 1990s, privatization found advocates who complained that U.S. workers, paying compulsory payroll taxes into Social Security, were missing out on the high rates of return of the U.S. stock market (the Dow averaged 5.3% compounded annually for the 20th century.” (Unknown Author, Social Security Debate, retrieved from www.wikipedia.org). Now before you get all excited about privatizing, take a few minutes and consider the rest of this article before running around like a chicken with its head cut off.
“A report this year from the World Bank, once an enthusiastic privatization proponent, expressed disappointment that in Chile, and in most other Latin American countries that followed in its footsteps, “more than half of all workers Twelve Reason Why Privatizing Social Security is a Bad Idea, Retrieved from www.socsec.org). This is very important because if we choose privatization, it can be safely assumed that we also chose to de-regulate this industry and there fore will not be able to protect our citizens from those unscrupulous brokers. Surely we have learned better by now or are the economic crisis only a distance memory for those who will make the choice for the rest of us?
“As for investing in the stock market, you can make one for $50, buying through a Direct Stock Purchase Plan. Or you can find a company where you automatically pay X dollars a month for a period of time and then once your minimum required investment is reached, the auto-pay stops and you’re free to just hold it in there.” “You can also invest in mutual funds, also with automatic payments until you reach the minimum required investment.” (Unknown Author, How much does it cost to invest in the Stock Market? Retrieved from www.investing.hirby.com). My issue with this is failure of those who wish or advocate personalizing social security to “do the math”. “An annual average per decade regarding the S&P 500 shows a real total return of 7.0% from 1950-2009.” (Unknown Author, S&P 500: Total and Inflation-Adjusted Historical Returns, Retrieved from www.simplestockinvesting.com). One can only hope that this would suffice as a pension even considering that many Americans are now living longer and many wish to live better.
In conclusion, it is imperative that we also take heed to the small print when it comes to investing. These warnings come from a much respected place for investing called Sharebuilders but I am sure that may of these warnings may be identical with any of these investment vehicles. “Mutual fund early redemption policy: Share Builder reserves the right to charge $49.95 on the redemption or exchange of shares of any no-load, no-transaction fee mutual fund that is held less than 90 days, excluding the ING Money Market Fund. This charge is in addition to any applicable charges or expenses addressed in the fund’s prospectus.” ” Low-priced securities: In addition to the base commission, Share Builder will add a $0.007 surcharge per share on real-time trades when the average execution price per share is less than $1.00. The total commission (base commission + surcharge) is subject to a maximum of 15% of the principal amount of the trade, but no less than the base commission.” “Brokerage charges: Share Builder reserves the right to add, remove or change brokerage charges as deemed necessary and will attempt to provide fair notice of any adjustments.” “Mutual fund excessive trading policy: Share Builder has adopted an Excessive Trading Policy to respond to the demands of the mutual fund families – which make their funds available through Share Builder – to discourage market timing and excessive trading activity in mutual funds.” “Phone trades: Share Builder does not make recommendations and does not offer any investment advice. Customer Service Associates can provide the same security information available to you on the ‘Research’ tab of our website during the order-taking process if requested. All trades placed by phone are subject to the same terms and conditions as trades placed online.” “Express funding: The Express Funding service costs $6.95 for each real-time trade. Trades placed using Express Funding have a $5,000 daily limit. Daily is defined as the period of time between the close of business for Share Builder through the close of the next business day. Express Funding is available to individual, joint and custodial account types only.” “Option disclaimer: Options involve risk and are not suitable for all investors. Before investing in options, please read the Characteristics and Risks of Standardized Options” But the most important of all warnings are “securities products are not FDIC insured, not Bank guaranteed and may lose value” (Unknown Author, Share builders, Terms and Conditions, Retrieved from www.sharebuilders.com). Now compare what you have learned to what is currently offered through our currently “broken” social security system. Would you now say privatizing or personalizing your retire is worth the risk? We must begin to require better explanation about these things from any and all advocates regardless of party and affiliation.