Can Private Investments Save Social Security?

Everyone is talking about it. By 2019 it is expected that payroll taxes won’t be enough to keep Social Security payouts alive. The program could be out of money as early as 2041. It is quite evident that solutions are needed.

Social Security was established in 1935 by President Franklin Roosevelt. His intention was to provide disability benefits and retirement to the nation’s people. The program worked for a while and it is now estimated that 2 out of 3 retirees rely on the benefit program as their main source of income.

Now that the life expectancy is increasing, people are worried. Though life expectancy certainly isn’t the biggest issue, in fact, that is just the icing on the cake compared to the government borrowing that has really led to the issue.

The stats make it obvious that changes to the program are needed. When the program started there were 40 workers to every beneficiary. Now, there are only 3 workers to each retirement beneficiary. That number is only decreasing.

Some think that a market-based investment approach is the answer: allowing taxpayers to invest some of their contributions to Social Security. Perhaps it could help the situation, though it is a tough sell, especially after the $700 billion Wall Street bailout. The solution was first put on the table by President Bush in 2005.

John McCain is in favor of the idea, along with most republicans. They think it could allow people to make more through investments than they could with Social Security alone. Though most in favor of the idea still say they would not support changes unless they a guarantee for benefits is provided.

Barack Obama, along with most democrats, is a critic of the idea. Most critics stand their ground: this would expose retirees to market risk. As is very evident, market risk is high. It would also lessen the amount available to current retirees. With this solution, retirement funds would be a gamble, not a security.

While some are for private investing of Social Security, some are opposed. Both sides have valid views and ideas, but only time will tell whether Social Security will be solvent enough for future retirement beneficiaries and disabled persons.




For information on Social Security Disability, visit the

Social Security Disability Benefits Resource Center