Privatization of Social Security for Dummies

This was my post as a comment to an article called Obama Ignores Reality of Social Security where the writer was advocating the privatiztion of the American Social Security System.

I agree that the American Social Security problem is in deep trouble and the biggest problem is that there is no actual “Trust Fund” set aside but an I.O.U. from the Federal Government which has borrowed the funds for its daily operations. This would be okay if the Government wasn’t bankrupt big-time.

In my opinion, the answer is not privatization, however. The reasons is that corporations are not to be trusted any more than governments when it comes to your retirement income.

The answer is to follow the model of the Canadian Pension Plan (CPP), which is actually run by the Canadian Federal Government but which has actual monies set aside in a separate fund. This fund is UNTOUCHABLE in that it can’t be used for daily government operations. The CPP fund is run by professional advisors and has invested in stocks, bonds, and even in water utilities both in Britain and New Zealand. The CPP board also raised the contributions that Canadians must make dramatically in the last few years so that the fund will be able to pay Canadian retirees for many decades.

Ernie J. Zelinski
Author of How to Retire Happy, Wild, and Free
(Over 125,000 copies sold and published in 9 languages)
and The Joy of Not Working
(Over 250,000 copies sold and published in 17 languages)

As an aside here is another tidbit I posted in an article called Social Security Is a Secure Way to Find Great Pleasure from Being Terribly Deceived.

In February 2005 then President George W. Bush attempted to explain Social Security to Americans. This is what Bush said:

"Some in our country think Social Security is a trust fund - in other words, there's a pile of money being accumulated. That's simply not true. The money - payroll taxes going into Social Security are spent. They're spent on benefits and they're spent on government programs. There is no trust We're on the ultimate pay-as-you-go system - what goes in comes out. And so, starting in 2018, what's going in - what's coming out is greater than what's going in."

Here are some Retirement Quotations for Smart People to place Retirement in Perspective:

I used to have dreams that I died at my desk. Now that I've retired, I don't have those dreams anymore.
- Anon

One week into retirement, you'll be so damned bored that you'll want to stick bicycle
spokes into your eyes. You'll probably opt to look for another job or start another company. Kinda defeats the purpose of waiting [for retirement], doesn't it.
- Timothy Ferris in The 4-Hour Workweek

Why shouldn't retirees expect some reduction in Social Security and Medicare benefits, and soon? Before we retired, or will retire, we lived beyond our means by voting for those congressmen who would keep taxes low and borrow from the trust funds to pay government bills. Woe to the politician who would ask us to fully pay the taxes necessary for the services we expected from government. This large accumulated debt to the funds is coming due. So we have an obligation to help pay it off by accepting less from them or paying higher taxes on our retirement income. As retirees, we have no right to just pass our debt off on our kids. We certainly helped create it and should help pay it off.
— Werner Gruhl, Columbia

The Ideal Retirement Plan: "Marry an old rich broad and wait for her to die."
- Ivan Wilson (commenting on an online article about retirment.)

We have a manufactured vision of what retirement is, and that doesn't necessarily correlate with reality. Unless you have a well-thought-out scenario, you're going to be in for a shock at retirement.
- Paul Allen, 64, a self-employed software developer in Dallas