Not a Shy, Retiring Plan Mutual Funds (08/00) Vol. 6, No. 10 p.79; McReynolds, Rebecca
With Social Security income facing a number of
restructuring proposals these days, planning for the future can
be difficult. In the middle of this debate is a proposal
supported by Republican presidential hopeful and Texas Gov.
George W. Bush. The proposal, Senate bill 2313, would redirect
approximately 15 percent of the 12.4 percent currently collected
in social security taxes from workers and employers and put it
into private retirement accounts (PRAs). The money would be
invested in stocks, bonds, or both, earning market-rate returns
throughout the employee's career, until retirement. The proposal
would extend the retirement age to 70. It would also allow for
workers to make voluntary additional deposits into their PRAs.
The problem with this system is that there is no security in it.
A bear market could drastically affect one group of workers on
stride to hit retirement, while a bull market could create riches
for the next group of retirees. While the proposal promises a
safety net for such situations, to plan for one's retirement
would still require a lot of guess work. There are several other
questions about the proposal as well, including whether it would
really shore up the Social Security Trust Fund, how to avoid fees
and expenses from eating up returns, and how to prevent retirees
from betting on risky investments.