Sunday, November 16, 2014
Privatize or Increase Age of Eligibility?
What should we do about social security? There are many answers to this question that, in my opinion, tend to center on whether social security should be privatized or to increase the age of beginning eligibility. Some benefits to privatization would be the stock value getting an increase in value with billions of dollars being injected into corporate investment, which can be an economic stimulus. However, poor portfolio management can leave many retirees much worse off and the transition costs would be tremendous, which would drastically increase the deficit. Still, good portfolio management can be arise for many in historically safe long-term portfolios diversified from unsystematic or diversifiable risk, but there would still be systemic or nondiversifiable risk caused by the market. This means personal responsibility and ownership would be created for citizens' retirement, which means they would have a personal stake in the nation's economy and it could cause for benefit cuts that are believed to be inevitable without raising the age of eligibility. Also, it would allow for many in poverty to have a chance for a wealthy retirement, but the market risk could leave very large numbers of retirees in a bad financial situation if they happen to retire when there is an economic downturn they weren't protected from. Furthermore, there are less complicated corrections available to social security and the privatizing the system would take money away from an already underfunded system when current IRA's and 401K's offer practically the same benefits as private social security accounts. Thus, what should be done can depend on one's political, economic, or ideological beliefs that are definitely not universal. The question of what should be done is still not answered in my mind because I would want to see further research into the issue with concrete parameters discussed.