In the 1930ís and 40ís Democrat President Roosevelt instituted many government program aimed at helping the common man help themselves. One of these programs was a forced retirement plan called Social Security.
Under the Social Security plan as it currently exists there is a 15% tax on all income over $450 (up to a maximum of about $76,000). If you are self-employed you must pay this 15% tax yourself, which is then put into a government account from which you canít draw upon until your reach retirement age. If you are employed by another person or firm then half comes from your salary and half comes from the employer.
While retirement age was generally considered age 65, you could withdraw as early as age 62 but at a much lower rate (about 67% of your allowed benefits).
In the 1950ís and early 1960ís came an era in the United States we call the ďbaby boomerĒ period. This is a time when the popular increased far more than normally predicted. These baby boomers (and Iím one of them) are all expected to retire soon and there isnít enough money in the Social Security account to provide the planned benefits.
To help solve this problem, Republican President Ronald Reagan signed a law that upped the retirement age over the next few decades from 65 to 72. Early retirement would be moved from 62 to 67. This was a stop gap measure aimed at curbing the drain on the system.
The drain on the system does, exist! I know this first hand! My mother retired early at age 62 and lived to age 92. In her best years she made $200 a week gross and thus a whopping $30 per paycheck ($120 a month) was contributed to Social Security (seen on your pay stub as FICA). When she started collecting she got a whopping $165 a month, but at the end of her life she was drawing $500 with cost of living increases. While my mother worked for 40 years or more, her contributions werenít nearly what she drew out, because few people in government statistics expected her to live for 30 years past retirement age!
Now, Republican President Bush is working to shore up the system and what he is proposing sounds more like Social In-Security than Social Security. President Bush wants to let people elect to put a few of those 15% FICA taxes into a private account instead of the Social Security program. Over the years they may totally dismantle the Social Security program in favor of this privatized plan. The problem with privatized plans is that the individual can tamper with them, withdraw early, circumvent the concept, because today is more important than tomorrow! When happens then is that they reach age 55 or 60 and realize they are living from paycheck to paycheck and canít afford to ďretireĒ thus they keep working until the day they die with no other options available to them (other than possibly winning at Lotto)!
In theory, Social Security works! Many people simply canít save, especially if they barely make a living wage. One those with far more income have the reserves to start things that already exist like CDs (bank Certificates of Deposit, a high interest yield, long term savings account) and IRAs (Individual Retirement Accounts, with high interest and long term). For the people still making $200 a week (thatís start wage at many places around the country) in an era where housing is $500 a month and a new car costs $200 a month in payments, the Social Security program is the only way they can actually retire, otherwise they will have to work until the day the die.
Is privatization the right way to go? Not unless there are warranties and safeguards to make sure that there will be money in the private account for old age or survivor benefits, otherwise we need to simply shore up the existing system so that we can all expect Security down the road instead of In-Security...