Will everyone get these accounts when the program changes? Once again, this depends on who listen to and who you want to believe. The only group that did well when pensions were dismantled and shifted towards private accounts were the businesses who sponsored them and the industry that provides the investment services. If the United states government decides to changes their program, shifting the burden of retirement onto the worker, there is little argument that the government will benefit more than we will.
How much this shift will cost is debatable. Before I get to the cost of the programs change - another question further on - let's look at who the change is proposed for and how it will affect us.
Without a doubt, some change is needed. Currently the system is determining benefits and their increases to wages. A proposal to change this to benefits based instead on prices will have an immediate effect on retirement age and the money those future retirees receive. The reason the program has survived as well as it has was because of this wage-based accounting. The changes in the amount of workers paying into the system has come down considerably since it inception in 1935. But because of wage increases and payroll tax increases, which are shared by both companies and employees equally, the system has allowed adequate time to find solutions to the predicted problems that lie ahead. Those problem are based on the fact that retirees will outpace workers creating a negative balance. Estimates for solvency have ranged over a wide period but most agree that by 2015, we will know whether solvency will take the program apart on its own.
Providing solutions will not be as easy as identifying the problem.
Currently, the proposed program change will be offered on a voluntary basis. Far too many what-ifs present themselves for any concrete arrangement to be finalized or even offered. With a history of passive involvement in the market by the average worker, suppose a very small percentage of the eligible choose these new accounts? Suppose the fear that every one on Wall Street is crooked and that improper accounting is the norm. Will this keep the average American sitting on their hands? Suppose the skeptics are found not only in the older population, but the younger one as well?
In fact, AARP has vocally opposed any effort by the administration to create the privatization of the program. They however do not object to the creation of private accounts to help supplement the program. Younger people have been the focus of these changes mostly due to their lack of belief in the future of the program. They have grown up listening to politicos warn of the current account deficits and wholly believe that system does not offer them any hope of a benefit. Older workers have not responded well to the terminology "privatization" and seem to want to fix the status quo rather than dismantle the program in any noticeable way.
Would you be able to invest if your retirement was your responsibility?
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