Mandatory Private Pension Systems
Are Mandatory Private Pension Systems in America’s Future?
Social security can be defined as “the theory or practice of providing economic security and social welfare for the individual through government programs maintained by moneys from public taxation.”(Random House)The current social security system works by collecting taxes from current workers and using the monies collected to pay-out annuities to retirees, disabled workers, and benefactors of deceased and disabled workers.The high unemployment rates, and increased number of social security benefactors has created a problem within the current social security system.There is not enough revenue coming into social security to support the payout needed to sustain financial security, for those who are already or soon will be collecting social security benefits. “The demographics of an aging America progress inexorably, while living standards for future retirees are increasingly uncertain.” (Farrell).Therefor; the current social security system should be replaced by a mandatory private pension system.
Mandatory private pension systems can be defined as: “personal plans that individuals must join or which are eligible to receive mandatory pension contributions. Individuals may be required to make pension contributions to a pension plan of their choice normally within a certain range of choices or to a specific pension plan.”( OECD Working Party on Private Pensions, 2005).This type of system will still require all workers to pay into a retirement plan, but will also allow the individual to choose how much and what type of plan the money will be invested in.In other words Americans will become more vested in their retirement savings plans and will have a greater responsibility in securing their own financial futures.
Those who are in favor of saving the current social security system support the idea of raising taxes and lowering benefits.The idea behind this is that it would create equality between the monies coming in and the monies going out of social security.However, this decrease in benefits paid will have an effect on the quality of life for those who are depending on its annuities to survive.Dog food for diner anyone?Well, if that’s all that can be afforded than perhaps yes.
"We can't solve problems by using the same kind of thinking we used when we created them."(Einstein).It is time for a new approach.Mandatory private pensions will allow Americans to determine their own financial fates, as opposed to the government serving up some dog food and labeling it gourmet.“The risky alternative for future retirees is to make do with less. We'd all be worse off then—not just the elderly.”( Farrell)
Many in favor of keeping the old social security system do not believe that Americans can handle the responsibility of securing their own financial futures.Supporters of the mandatory private pension systems must point out that the current social security system is on the verge of depletion and that the government has failed to responsibly handle the financial security of the working class.The current system has failed to do its job.Americans should have the liberty of failing on their own and also the freedom and opportunity to succeed.“It comes as no surprise that mandatory savings become even more critical to future retirees' well-being when the model factors in the assumption that Social Security benefits will be cut.” (Farrell)
The current social security system is no longer a feasible approach to providing social security.Mandatory private pension systems not only offer an alternative to the failing system we are currently using, but it also offers citizens’ opportunities to make choices and have a greater control over their futures.I don’t want to eat dog food, but it would go down smoother if I were to feed it to myself, rather than have the government shove it down my throat and tell me to swallow.
Einstein, Albert; http://rescomp.stanford.edu/~cheshire/EinsteinQuotes.html
Farrell,Chris;Deficit Could Reshape Retirement Funding By Chris Farrell http://www.businessweek.com/investor/content/feb2011/pi20110216_311588.htm
OECD Working Party on Private Pensions, 2005; “'Private Pensions: OECD Classification and Glossary, 2005 edition”, OECD, Paris. http://stats.oecd.org/glossary/detail.asp?ID=5248,
Random House; "social security." Dictionary.com Unabridged. Random House, Inc. 11 Oct. 2011. <Dictionary.com http://dictionary.reference.com/browse/social security>.