Monday, January 16, 2006

Social Security Reform

One big issue that seems to have largely disappeared from media coverage lately is social security. Changes have been proposed, but nothing has happened. Old-timers don't want to change the system, although it is time for a change. The government should not be held responsible for the welfare of everyone, everyone should be responsible for their own welfare. It isn't that hard either.

Social security takes up 6.2 percent of your paycheck. If you earn $40,000 a year, that means $2480 is taken from you for social security. If you work for forty years, you will have accumulated $99200. If you save an additional two percent of your paycheck, you save $800, for an additional $32000 over forty years. Add that to the original balance, and you have $131,200.

The average retired worker gets $895 a month in Social Security payments, taken from the 2000 Census. If you put 8.2% of your paycheck in savings, without contributing to Social Security, you would have 146 months worth of payments, or a little over twelve years. Now, that doesn't seem like a lot.

Keep in mind that I didn't add interest to that. If you put your money in the bank, you will at least get some interest. If you invest your money, you can get a little more, also. And if your employer provides you with some sort of retirement compensation, that's more money. If you invest privately, than you never have to worry about your money not being available when you need it, because millions of others aren't using your account also.

So why not just get rid of social security? This quick figures show that a private investment can help you get by just fine. Sure, some people are disabled, but why not let charity take care of them? Instead of social security, set up a tax free donation system to help these people. Whenever you contribute, the money you contributed is taken from your taxes, up to x percent of your paycheck. This way, people will be happy to contribute, and the system helps those who need it.

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