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Monday, April 30, 2012

Does the government need to control your retirement

Contrary to what many believe, Social Security is designed to assist you in your retirement.  It is not intended to be a stand-alone system and most people will need an additional plan to realize their retirement goals.  There are many different ways to save and prepare for ones retirement without using the government’s social security program.  Some companies have retirement programs for their employees or programs that they can elect to contribute to.  The market provides additional options to easily invest in one’s retirement all without government interference.  “Opponents of allowing younger workers to privately invest a portion of their Social Security taxes through personal accounts have long pointed to the supposed riskiness of private investment.”  A properly formed retirement portfolio can be used to diversify away most of the risk in investing.  Long term investments in stocks, public bonds, and funds will produce higher returns on investment than the returns generated from Social security investments.  This would lead to having more money available to spend during retirement.
Presently the Social Security system is starting to come to grip with a few complex challenges.  To bring it to what is believe to be a properly funded amount would require taxes to be increased.  One way is to increase the “the current 12.4 percent payroll tax to at least 17.6 percent, a 42 percent increase”.  This increase would reduce the disposable income of wage earners which would then in turn slow down the US economy.  Another option is to reduce benefits by “24 percent”.  This would reduce the income of retirees and make it harder for them to make ends meet.  I believe that the best strategy would be to allow eligible employees to invest their portion of Social Security tax into a private account.  This would give them direct control over their retirement and control over how the money is invested.  By doing this we can reduce government liabilities and make people directly responsible for safeguarding their future.

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