Lawmakers Urged To Create Privatized Retirement System

Ulla Graham of Spokane recently took time away from her busy schedule as a homemaker to tackle the Social Security crisis.

Young people are convinced the Social Security system as we know it today will crash, and they will get ripped off.

They’re right. However, it doesn’t end there. Social Security is a ripoff of most Americans, young and old alike.

But getting back to Ulla, neither she nor her husband, Don, or either of their two grown children thinks the present system can last long.

So Ulla (Oo-la) spent days rounding up Don’s old pay records going way back. Then she added up all the contributions made by her husband and his employers over the past 40 years. They total $86,116.

Next she calculated the earnings if that amount had been placed in a conservative investment yielding just 5 percent compounded annually. By now, she figured, the retirement nest egg would have grown to $190,665.

This would enable the couple to start drawing out $794 a month today in interest earnings only.

That’s almost $10,000 a year income. And it’s just the husband’s side of the ledger.

Assuming both spouses worked and earned comparable incomes, their combined nest egg would approach twice the above amount - or going on $400,000. That sum would yield a retirement benefit of about $20,000 a year for a married couple.

And, here’s the real kicker - the $20,000 interest check from the Grahams’ combined investment wouldn’t even touch the principal.

That $400,000 could remain intact, as a retirement fund for their children. Or it could be used to pay off the national debt. Or to finance the grandkids’ education. Whatever.

At least that’s the way Ulla figured it. And far be it from me to nitpick.

Social Security is almost as big a fraud against Americans who work for a living as is the insanely convoluted and unworkable health care system.

Consider:

Social Security sucks 15.7 percent of the national payroll down a rat hole.

The return on Social Security is said to be under 1 percent a year.

It has been calculated that retirees could have earned 10 times that over the past 20 years simply by plunking their payroll deductions into an average mutual fund.

Return on Chile’s popular privatized national retirement system has averaged 15 percent for 15 years.

The theoretically self-sustaining trust fund upon which American retirees depend does NOT in fact exist due to congressional pilfering to sustain ever-escalating off-budget government growth.

So, any hope Social Security will endure assumes future generations opt to pay back a trust fund tab that someday will rival the national debt.

But in spite of everything, the system will ultimately collapse anyway under the onslaught of baby boomer retirements.

So, radical overhaul is not an option. It’s a necessity.

But popularly espoused fixes all have serious downsides or pose unacceptable risks.

Slashing benefits would be political suicide, shortchange everyone, and postpone the inevitable.

Similarly, racheting up payroll deductions to cover the shortfall would wreck the American economy.

And seizing the life savings of senior citizens forced into the system, as advocated by X-generation extremists, is immoral, unethical and un-American.

“The United States can’t now decide to go back and just retroactively break its contract with all those who paid into Social Security,” observes Ulla Graham. “These people’s lives depend on it.”

But there is a way the government can cut its losses starting now, she says. It can cap Social Security at a level consistent with the contract Congress made with American workers when it required them to start paying into a government-run retirement system.

It can start a whole new privatized retirement system that makes financial sense and that politicians can’t plunder. And it can mandate that payments from the paychecks of workers be placed into approved, bonded, private investment accounts.

Every older person with whom she’s discussed privatization is “enthusiastic,” she says. “They see it as the children’s salvation.”

The sooner this financial rift between generations is patched up the better.

, DataTimes MEMO: Associate Editor Frank Bartel’s column appears on Monday, Wednesday and Sunday.