Fixing Social Security so that it will be there, for the next generation, is a topic that gets discussed, but nothing seems to ever be done to make any repairs, to the system, by either the Democrats or the Republicans.
One idea, that the GOP folks tend to like, is former President George W. Bush’s plan to privatize Social Security. This plan would allow folks to take some of their money placed into Social Security and instead invest it themselves, in a 401K-type plan.
While sounding good on paper, the reality is that most Americans are not financially literate, thus lack the savvy and knowledge of the stock market to make sound choices. As a result, many have not done well with their employer provided 401K plans, but at least they get the full Social Security benefit when they retire.
Imagine someone who would get less Social Security benefits, with the Bush plan, who didn’t do well with their 401K Bush investment option. That person would financially be in worse shape, through no fault of their own, other than their lack of knowledge and ability in playing the stock market, which by the way, is very similar to playing the ponies at the race track. Both are a form of gambling. So, no, privatizing Social Security is not a solid plan to fix this important insurance program for the elderly.
While I don’t support Bernie Sanders in much of what he proposes, I do like his plan to fix Social Security. It is a common sense approach and is very workable that would fix Social Security so that our kids would know it will be there for them, when their turn to retire comes.
In brief, here’s Bernie’s plan to fix Social Security:
Sanders says that Social Security is not going bankrupt. He’s correct, Social Security will continue to generate healthy amounts of revenue from the 12.4% payroll tax on earned income. It may not be enough to support the existing payout schedule over the next 75 years, but it won’t become insolvent and definitely will not go bankrupt.
Bernie opposes the GOP proposal of raising the age for full Social Security benefits. Your full Social Security retirement insurance benefit is based on your birth year. It’s currently set to top out at age 67, in 2022, for folks born in 1960 or later. Some in the Republican party want to raise that full retirement age to 70.
That might be fine for those sitting at a desk typing on a computer, but for those who do any sort of physical work, by the mid-60s your body is definitely not working at its peak and adding extra years would be a real heart ship for such workers. This assumes that their employer doesn’t replace them for a younger, less expensive worker. Age discrimination is difficult to prove, so this GOP plan would hurt many hard-working elderly Americans.
In his 2016 book, “Our Revolution”, the Vermont Senator said this about protecting the elderly and disabled, “Social Security is the most successful government program in our nation's history. Before Social Security was signed into law, nearly half of our senior citizens lived in poverty."
"Today the elderly poverty rate is 8.8 percent...Social Security is not just a retirement program. It is an insurance program that protects millions of Americans who become disabled. Incredibly, the only source of income for about 3 million persons with disabilities is a Social Security Disability Insurance (SSDI) benefit that averages just $35 a day. Today, 28.5 percent of disabled Americans are living in poverty. We have got to do a lot better than that.”
Bernie’s plan calls for the rich to pay their share in Social Security taxes. He wants to create a donut hole so that those making over $132,900 but less than $250,000 each year would not pay more Social Security tax. Those making over $250,000 per year would pay the 12.4% Social Security tax for all money above the $250,000 amount.
Sanders also wants to go after some of the income that isn't "earned", thus is not taxed for Social Security. This is investment income, that many wealthy folks get as their income. They don’t collect a paycheck as the rest of us do, so none of their income is taxed for Social Security. With Sanders plan, they too would be paying their fair share into Social Security.
As I said at the beginning of this column, I don’t agree with Sanders, on other issues, but on this, Bernie is absolutely correct and I hope that all of the Democratic Party candidates for President make this plan their plan too. This is a very workable plan that would ensure our kids will get their Social Security benefits when their turn comes.