Email L. Henry Platt, Jr.
PRIVATIZATION OF SOCIAL SECURITY
President Bush still wants to allow for some privatization of Social Security, and he seems to be very determined to do this in the 2005-2006 Congressional term. In my article Social Security: A Social Program I provide extensive reasons why the current taxes must be used for the current benefit schedules, but if Mr. Bush wants to allow workers to improve their benefit schedules through investments in the Stock Market, I offer the following (proposed) Bill:
Bill #__________ Private Investment of Social Security
As we begin the twenty-first century, many workers are concerned that their Old Age Benefits from Social Security will not provide enough money for a comfortable retirement. The concept of investing some of Social Security taxes in the Stock Market is seen by some as a way to increase the size of future retirement checks. To this end this Bill provides for the creation of a Roth Social Security Account. This will be a voluntary account which may be linked to a Roth Individual Retirement Account.
Those individuals desiring to participate in the Roth Social Security Account would simply chock a box on the Federal Wó4 form each employee fills out to direct the amount of taxes to be withheld from his paychecks. Each employee who checks the box will be enrolled automatically in the Roth Social Security Account, and he will have an additional 3% of his wages withheld for this account. His employer will be required to pay 1 1/2% of these wages (not to exceed $300 per quarter) into this account.
The Roth Social Security Account will be operated by the United States Treasury as a savings account paying interest at the same rate as the current rate being paid in Series EE Savings Bonds held to maturity. Those individuals who desire to invest their funds in other fiduciary vehicles would be permitted to direct funds from their Roth Social Security Account into a previously established Roth Individual Retirement Account. This transfer would occur on or about the person's birthday or approximately six months after his birthday such that all transfers would occur between July 1 and December 31 in each year. Investment laws and regulations governing Roth I R A's would then govern the investments.
Funds left in the Roth Social Security Account would continue to earn interest at the Series EE rate until transferred to a Roth I R A, withdrawn at retirement, or the death of the individual. A further option might be for an individual at retirement to roll over his Roth Social Security account into his regular Social Security Account for an increase in his monthly benefit in the amount of 1/2% of the roll over for the rest of his life with 3% of his roll over being provided as an augmentation to his Social Security Death Benefit, and the augmentation would be paid to some other family member should there be no surviving spouse.
Using this formula for thirty years with an income of $20,000 per year leaving all monies in the Roth Social Security Account, monthly checks would be about $700 more.
© L. Henry Platt, Jr.