Social Security Privatization

Social Security Privatization
Student’s Name
Institution of Affiliation
Social Security Privatization
Privatization of social security is a good initiative. Among the many reasons that are given is that privatization is a viable method that can be used to increase the return rates on payroll deductions, bearing in mind that the program is in its worst state today compared to the past years.
I would support partial privatization because even though social security benefits and taxes are tangled in income distribution webs, a majority of the money goes from the young people to the old. Critics argue that the eventual losers will take on the pensioners. However, through partial privatization, a peace offering would be served between the pensioners and the young individuals.
The current social security system constitutes an intergenerational transfer of income. Active workers put resources into the program that is used to cater for the benefits of retirees. The system in place has been successful because, for a long time, there has been enough workforce to pay the benefits of retirees. However, the world is witnessing a demographic shift in this system. It is estimated that by the year 2020, the social security program will start running on deficits, and the shortfall will consume the social security reserves. The Social Security Administration (SSA), estimates that the funds will be depleted by 2034, a point in which the program will bring in money that can only cater for 75% of the pensioners (Poteba, 2016).

As a worker, I would invest in private accounts that give me control over my retirement. I would capitalize on a combination of bond, stocks and money market funds, bearing in mind the objectives and the risk tolerance. The benefits of this investment are that once I reach the retirement age, I can buy an annuity, which can provide me with a lifetime income. Furthermore, any money used for an annuity or that is not withdrawn can be handed down to my heirs. This type of plan is safe for social security because theoretically, money that is in a private account has the potential to go beyond that put in social security. Moreover, retirees will not worry about the changing demographics, since their retirement benefits will be independent of the size of the present workforce.
Reference
Poterba, James. “Economic Implications of Demographic Change.” Business Economics 51.1 (2016): 3-7.