One of the left’s major talking points is that Conservatives want to privatize Social Security. I agree. We do. As it stands now, every penny paid into Social Security goes into the general fund where Democrats and RINOs spend every cent. No interest is paid on the money and the government currently owes Social Security at least 2.8 trillion dollars. (Figure is from 2014) So, does this make sense and would privatization actually work? Actually, it already has.
President Ronald Reagan gave 3 counties in Texas permission to drop out of Social Security and to set up their own version.
The counties and employees pay in the same amount to the counties’ pension plan by the same amount they would pay into Social Security. That money is invested and every penny goes directly to their pension plan. Galveston, Matagorda, and Brazoria County are the three counties using the now 37-year-old plan. The money is turned over to a money manager and companies bid on the money and guaranty a certain percentage return. The fund has turned a profit every single year including the three worst years of the Great Recession.
The contributions are pooled, like bank deposits, and top-rated financial institutions bid on the money. Those institutions guarantee an interest rate that won’t go below a base level, and could go higher if the market does well. Over the last decade, the accounts have earned between 3.75 percent and 5.75 percent every year, with an average of around 5 percent. The 1990s often saw even higher interest rates, 6.5 to 7 percent. Thus, when the market goes up, employees make more; and when the market goes down, employees still make something.
Like Social Security, employees contribute 6.2 percent of their income, with the county matching the contribution (Galveston has chosen to provide a slightly larger share). Once the county makes its contribution, its financial obligation is done. So there are no long-term unfunded liabilities.
But not all of that money goes into an employee’s retirement account. When financial planner Rick Gornto devised the Alternate Plan in 1981, he wanted it to be a complete substitute for Social Security. And Social Security isn’t just a retirement fund; it’s social insurance that provides a death benefit—a whopping $255—survivors’ insurance, and a disability benefit.
That $255 comes with many conditions, so you are not even assured to get that. But in the Texas plan, a portion of your payment goes into a term life insurance policy of four times your annual salary up to a maximum of $215,000 or almost 850 times the amount paid by Social Security. Also, if someone dies under Social Security, that money they paid in is lost with the exceptions of minor children and their spouse if the spouse doesn’t work. Under the Texas plan, no money is lost and it all goes into their estate.
And those who retire under the Galveston model do much better than Social Security. For example:
- A lower-middle income worker making about $26,000 at retirement would get about $1,007 a month under Social Security, but $1,826 under the Alternate Plan, according to First Financial’s calculations.
- A middle-income worker making $51,200 would get about $1,540 monthly from Social Security, but $3,600 from the banking model.
- And a high-income worker who maxed out on his Social Security contribution every year would receive about $2,500 a month from Social Security vs. $5,000 to $6,000 a month from the Alternate Plan.
Which plan would you have rather invested in over your lifetime? This is a no-brainer. Privatization works but liberals hate it because it robs them of money they use to buy votes with through massive spending.