As with most people and most issues, I tend to pay most attention to issues that affect me directly (not a pretty trait, but a human one) so I’m much more aware of Social Security privatization now than in times past.
Please indulge me a personal anecdote:
My father’s first “tax paying” job (he’d worked for cash before then) was as a private in the final months of and 18 months following WW2. From 1947 til his death in 1982 he worked non-stop at jobs ranging from minimum wage to, for most of the last decade of his life, significantly above the average income of the time/place (upper middle class would be fair). When he died I had just turned 15, my brother was 3 months from 21 and my sister was over 21.
My brother, a full time college student then, drew Social Security on our father’s account for 3 months, then he was ineligible. I drew Social Security until the last month I was 17 (since my birthday’s on the 1st I was ineligible for that last check) because even though I was a full-time college student at the time the laws had changed (Reagan era) and eligibility ended at 18. My mother drew a smaller check on my behalf until the last month I was 15 (again, because my b’day is on the 1st I wasn’t eligible for the final check), though prior to Reagan’s adjustments she’d have drawn one til I was 18. (This isn’t to bash Reagan but just to explain.) All totaled, my father paid Social Security for 35 years (most of it at or above average income for professionals) his account disbursed checks for about 49 months [not quite 3 years for me, 3 months for my brother, 10 months for my mother]).
My mother began working at Soc. Security paying jobs in 1952 and save for 3 non-consecutive years of un (or under)employment continued paying until her retirement. She began drawing Social Security month after her 65th birthday (Oct 2000). At the time she was still working full-time (at a job that paid well above average for professionals and, I may be wrong but I believe, her employer continued deducting Social Security until she retired) so her working status along with her age (65 rather than 70) meant she did not draw full amount. When she did retire a few months after she turned 69 she began drawing the full amount she was then eligible for (which I think was slightly less than she’d have drawn had she wanted until her 70th birthday, but not a lot less).
Okay, so all totalled my mother (the only person ever to draw SS on her account, and she used her account rather than my father’s as by the time she was 65 her account was able to make larger payments than his) paid Social Security for about 50 years, drew partial SS for slightly over four years (about 50 months) and {mostly full} Social for about 18 months after that. (Thank God she started drawing when she was 65 as it allowed her build up a very nice nest-egg over that 4 years and otherwise it would have been gone.)
Okay, also about my mother: in 1989 she was 54, absolutely broke (no savings and only enough to cover the essentials in checking) and thousands of dollars in debt. That’s the year she opened an IRA through her last employers. By making the highest payments possible to her employer 402c {I believe that’s correct- it’s the non-profit equivalent of a 401k} and courtesy of employer contributions she was able to build up a fairly substantial amount. She began drawing full retirement 15 years later at 69, drew retirement for about 18 months, and then she died.
Between them my parents paid Social Security for more than 85 years. Admittedly that began when they had salaries around $1800 per year, but then that was also well over 50 years during which interest would have accumulated. Of that 85 years since they both died relatively young (my father was mid 50s, my mother died a month before she turned 71) they drew Social Security payments on the two accounts for less than 10 years, and that’s counting the partial payments on my father’s account and the first four years at “not full” Social on my mother’s.
Had my father had no children and since his widow drew Social on her own account, his 35 years of payments would have totally vanished. Had my mother died in summer 2000 (when in fact she spent a summer in ICU and was expected to, her account would have totally vanished. Her private account not only did not vanish when she died, but the significant unused balance reverted to her estate, almost $50,000 even after the tax penalties for one-time-payment were paid (this week).
With all “I’d rather have her alive than have the money” sincere disclaimers in place, I don’t mind telling you that the $50k from her retirement account came as a very pleasant and unexpected surprise.
(This is not a gay marriage rant but money related): I am gay. If I were to settle with a domestic partner and that partner was a neurosurgeon with an astronomically higher income than mine and we were to remain together until retirement age and for it all he was by far the higher paid, I would not benefit in the least from his SS because the Federal government does not recognize same-sex marriage. Supposing he has no children and dies one month before he would have begun drawing benefits, then the considerable amount he paid in to SS would be gone. Likewise if I were to become a multimillionaire through copyrights and investments and settled down with a partner in significantly lesser financial circumstances, OR if I were to never have a marital type relationship at all, my money paid into the system is gone.
If Social Security were privatized, then in the situations above my father would left a significant amount of money. (In fact, due to unexpected expenses and admittedly poor financial planning he died broke and deeply in debt and that’s why my mother’s finances were terrible for almost a decade; a significant amount of cash in 1982 [if my father had an IRA] would have been life changing, would have made my mother’s life INCOMPARABLY better and would have allowed me to finish college years earlier, begun grad school and become self-supporting a decade earlier and I’d be in a much better financial situation today.
Likewise, in the hypothetical same-sex unions mentioned above, if IRAs were allowed to replace SS the same-sex partners would inherit a nice cash sum or a nice pension without displacing any other assets. (True, the partner could have an additional insurance policy or an additional IRA, but then he’d still be out the money paid to SS.)
So, am I correct in saying that from my examples above private rather than public Social Security would be far better as a solution in many situations than federal SS? This isn’t rhetorical- if it’s not true then I’d like to know as I’d like to have an informed opinion on this issue. (Assume that a privatized SS would carry with it a near impossibility to take out funds before you are retirement age or disabled as this is one of the few times I’d support the government protecting citizens from themselves; that most citizens do not understand complicated money matters [and I include myself] and would not reinvest the amount is the main downside I see to privatization].)