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Monday, November 01, 2010

Private accounts for social security?

We recently discussed the dire situation of social security in class and discovered that within a few years we will no longer be able to cover social security benefits with payroll taxes and from then until about 2040 the social security system will have to cover benefits by redeeming Treasury securities. After that the only way that social security will be viable is to ether reduce payouts to recipients or get the money from somewhere else. Of course there have been other proposed fixes for Social Security such as creating private accounts for people to receive their funds from in the future. This idea is criticized by many for a variety of reasons the chief among which is that private accounts could lose money because of instabilities in the stock market or other markets. No one disputes that social security is headed in to a bad place the dispute is just how it should be fixed, I for one think that if it manages to increase (or leave neutral) the future benefits for recipients without causing undue stress on future generations Private accounts would not be a bad thing.

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