Social Security Is a Bad Deal for the Poor

[Richard Arnold <keycon@mindspring.com>]

Social Security simply costs too much and pays too little to be a
good deal for any worker, but it is a particularly bad deal for
low-wage workers who depend on it most.

Social Security was designed to supplement private savings, but
low-wage workers simply don't have enough money left over to set
aside for retirement after paying the Social Security tax.
Consequently, nearly one in three of today's seniors depends on
Social Security for more than 90 percent of his income.

Social Security's benefits often are not enough to protect workers
from poverty. In fact, more than 1 in 10 seniors live in poverty.
For some groups, the statistics are even worse: 19 percent of widows
and 29 percent of elderly African-Americans fall through Social
Security's safety net.

Investment Opportunities and Account Ownership

The government should give all workers the freedom to redirect
their payroll taxes into individually owned retirement accounts
that could be invested, similar to IRAs or 401(k) plans. Those
accounts would give low-wage workers a better deal for the dollar
and provide far higher benefits than does Social Security. A
guaranteed safety net funded by general revenues could ensure that
no more workers retire in poverty.

Higher benefits:

Through the power of compound interest, all workers would be able
to accumulate substantial savings. Take, for example, a 28-year-old
worker making $13,500 per year and paying $1,674 in Social Security
tax. If he/she invested in a conservative savings program that
earned just a 4 percent return, she would accrue $177,147 by age
67. That amounts to a monthly benefit of $1,243-$400 more per month
than the benefits promised by Social Security.

Private property:

Workers would own their savings. Therefore, if an individual died
before reaching retirement, he could leave his accumulated savings
to family members. That is important to low-wage workers who
typically do not live as long as do the rich.

Fair and secure:

Workers deserve the chance to participate in a system that makes
the most of their contributions. In addition, personal accounts
would free low-wage workers from dependence on government for
retirement security, so benefits would no longer be subject to the
vagaries of politicians. Finally, all workers could accumulate real
wealth so no one would be condemned to retire in poverty.

Contrary to one poster's comments (140 IQ) that stated he didn't
want to have to deal with managing his investments, it's simple.
Just put the money in a simple savings account. This is still better
and safer than letting the government squander his money. You don't
have to have a 140 IQ to understand compound interest - it's obvious
our government lifers don't get it.

Richard Arnold