Social Security Reform

Its always interesting when the topic of social security reform comes up in congress. I think everyone knows it needs to be changed in some way, but its a political landmine dealing with it so nothing seems to happen. The idea of private accounts does have some good points, but also some bad points. In particular, assuming they will allow the money to be invested in the stock market, is that many of those without the experience or knowledge in the market could get burned, risking some or all of their retirement savings. I personally like the idea myself, but what about the person that puts it all in the market and loses it all and then has no savings when they retire? I can see the commercials from the AARP already, some 70 year old guy homeless because of that.

I thought it was a mistake for President Bush to say this early in the debate that there should be no increase in payroll FICA taxes. Hey, I don't want to pay more either, but we either have to pay out less, put more in, or make sure the money in the fund earns more. Private accounts would help in that regard, but its not a slam dunk that would be enough. I don't think anyone would want the FICA tax rate to go up, but raising the cap more would probably be easier to sell politically.

There is already talk that the private accounts are going to be a big win for the financial servies companies but no one else. It could be a benefit for them, but too early to say for sure. The issue of any fees you would have to pay will likely be pretty heated. One executive at such a company dismissed that claim, but that is not really a surprise.

By the way, if you are curious about what you would retire with (projected from today and assuming the system is still solvent) you can go here:

http://www.ssa.gov/planners/calculators.htm

So what are your thoughts, should they?
1.) Just raise the payroll taxes
2.) Cut benefits
3.) Go with private accounts
4.) all of the above.