In: Economics
Critical Thinking Assignment Four
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Social Security Privatisation
I could not support social security privatisation.
Social security is an enormously successful program which is essential to the retirement security of the vast majority of employess all over the world.In America, social security is the single largest source of retirement income. About 62%of social security benefiaries receive over half their income from social security. For over 20% of retirees, social security is their only source of income. without social security over 40% of elderly would fall into poverty.Social security provide a sound, basic income that lasts as long as employee live.
But I could support partial privatisation of social security. Becouse , partial privatization provide dual opportunity to multiple income or contribution. Portion of retirement contribution investing in private securities give more profit or return than social security. I think , this dual play ensure at same time safety and risk of return.
Partial privatization of social security is an only optional, those who love risk or those who are able to contribute more they can choose, this is an extra source of revenue. Partial privatisation is more benefial for both government and individuals. Following are the benefit of privatization of social security:
Privatizing social security can boost workers rate of return by allowing retirement contributions to be invested in private assests, such as stocks, which yield a better return than the present pay-as- employees- go retirement system.It would replace the pay-as-employees-go social security system with privately run-system in which each taxpayer has a seperate account. Those in favor of privatization believe this approach would result in a higher rate of savings, better returns, and a higher standard of living for retiress.
The ideological advantages, for moving toward a private retirement system:
How would you go about investing your private share for your retirement
Diversification of Investment.
Aims to maximise returns by investing in different areas that wuold each react differenly to the same event. Diversification provide both security and high level of risk for returns.If people are willing to take systematic and unsystematic risk, this is the best way of retirement investment.
Drowback of social security privatization
Privatization isn’t a plan to save Social Security. It is a plan to dismantle Social Security. Private accounts do nothing to address Social Security solvency. In fact, because private accounts are financed by taking money out of Social Security, privatization nearly doubles Social Security’s funding gap and moves forward the date of its insolvency.
Privatization results in huge cuts in Social Security benefits with no guarantee that private investment can replace lost benefits. Most plans would reduce guaranteed Social Security benefits over time, even for those people who do not choose a private account. For those who opt for a private account, benefits would be reduced even further.
Privatization leaves little to be passed on to one’s heirs. Many plans would force account holders, upon retirement, to use the assets in their private accounts to purchase, at a minimum, an annuity sufficient to raise their total remaining Social Security benefits and monthly annuity payments to a poverty level income. The remaining assets in the account could then be used during retirement to make up for the plan’s huge cuts in Social Security benefits. Only the excess after required annuitization and after expenses of retirement would be available to pass on to one’s heirs.
Private accounts may be voluntary, but the cuts are not. Even for those people who choose not to participate in a private account, Social Security benefits would be cut. Those cuts would effectively transfer money from those who opt out of accounts to those who opt in, forcing workers who decide against exposing themselves to the risks of Wall Street to subsidize those who are more willing to gamble with their retirement.
Is this a safe plan for the future of Social Security
No, this not a safe plan for the future of social security. Becouse, Investment risk is huge. Privatisation would eliminate the pay-as- you-go process,Instead, each taxpayer's contribution would be invested in a seperste account for their retirement, and its value would fluatiate with the value of thier investment in the market.
For example : Due to coronavirus outbreak, badly affected global the share markets, private securities.All most capitalist countries face unbelivable financial crisis and inflation.
If employess are no able to bear this type ( covid-19 financial risk) risk, create social and financial problems in society. So, full privatization of social security is challenging and not a safe plan .
Thank you....