Many financial analysts thought that the issue of Social Security privatization was dead, but a recovering stock market could prod lawmakers into bringing it back to life. George W. Bush proposed privatizing the largest retirement savings program in the country half a decade ago, although this was fortunately shot down. Despite the significant drops in the stock market the past ten years (more than 50% a couple of times in that period) and the dependence that many workers had on their pensions, the last one-and-a-half years have seen the market getting stronger; and this is what makes the push for privatization likely, especially from newer lawmakers who have focused on it as part of their campaign platforms.
Why is the said privatization a significant concern? It can influence the way most seniors allocate their investments. First, retirees will find it difficult to attain financial confidence if they have to hope for favorable market conditions to ensure they will have food on the table if the program transitions into privatization. Statistics peg that beyond 50% of all couples beyond normal retirement age, and almost three-fourths of all single workers get half or more of their overall income from Social Security. As for a fifth of all couples older than 65 and about 40% of all single employees get more than 90% of their overall earnings from the program which it is not predicted to change because of privatization.
If workers no longer have access to the guaranteed pension benefits because of the program changing, they may be forced to depend on personal savings and retirement accounts. This gets these people involved in more risk, such as investment and interest-rate risk. For the most part, the average worker does not have a comprehensive grasp of all available investment options like for example, those who buy into mutual funds typically buy at a premium and sell at a bargain. If you do invest well by yourself, the second yet equally dangerous risk of low interest rates is possible when you finally retire and need decent income from your initial investment.
Participating in and depending on Social Security should not be a gamble. It was developed as a social program to insure the average American worker throughout the generations so that they will not have to wait for food coupons and live a hand-to-mouth existence because they contributed regularly to the program, and many of the seniors today hope that the program does not leave their kids and future generations out to dry. Ultimately, Social Security privatization will favor the haves, as opposed to the have-nots that you need a good back-up plan or two if the transition is going to happen.
Katherine Smith is an author who specializes in financial topics concerning seniors. Puritan Financial Group gives seniors ways to stabilize their retirement funds and guard against nest egg depletion. For more information on how Puritan Financial Group can help you, please visit our website at http://www.puritanlife.com.