The privatization of social security will not provide substantial changes and will ultimately cause more issues within our society. As the average lifespan of an American increases, more pressures are put on the social security system. As time continues to pass, the current system maintains its path toward bankruptcy. Social security is currently underfunded; to solve this issues taxes must be raised or benefits must be cut back. Even though this is a growing problem within our society, the answer is not to privatization. Social security privatization will simply create more headaches for our society as a whole.
The privatization of social security will as a result leave less money for current and future retirees. Poor portfolio management will leave some retirees with must less money than they expected. Stocks and bonds may have historically preformed well as a long term investment, however, there have been large fluctuations in the market in recent time. A few years ago the Nasdaq lost over 60% of its value when the tech bubble burst; even a diversified portfolio at this time lost around 30% of its value due to the effects that the burst had on all of the other industries. Currently, the market situation is looking pretty bleak as well. Poor portfolio management and the fluctuations that occur in the market make privatization a slippery slope.
Additionally, privatizing social security will further advance the shortage of funds within the system. By enabled employees to put money into private accounts, less money in turn will enter the current system; as a result the current social security system will become bankrupt even earlier. There is simply no need to setup private accounts because IRA’s ad 401k’s offer the same benefits that these private accounts would. Also, the transition cost associated with the setup of these private account would accumulate to a substantial amount; this just adds fuels to the fire, regarding the social security crisis. Social security privatization is not as beneficial to our society as some people might believe.
Although the current social security system needs reform, privatization will only create more issues than it will resolve. Fluctuations within the market and poor portfolio management will cause a increased loss of funds for the current system. Furthermore, private accounts are unnecessary because the setup costs will add up and currently available option offer the same benefits. These are the reasons that the privatization of social security is a poor option.