Why Low-Income Americans Should Be Allowed To Opt Out Of Social Security

“Race and Retirement Insecurity in the United States”, a new study published by the National Institute on Retirement Security, shows a morose picture of the retirement savings of minority American families. The mean amount of retirement savings held by black households is $20,132 and $17,600 by Latino household, which are paltry when compared to the $111,749 held by white households.

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Many left-wingers, who often claim to represent the interest of low-income America, claim that the answer to retirement security for minorities is Social Security. The problem with this is that Social Security is broke. The Social Security Administration has more or less announced that all Americans who are in their 40s or younger, can expect little more than 75% of their promised benefits.

This problem has been on the rise for quite some time, but politicians have skirted the issue year after year, mostly because it is a hard one to deal with.
Since the Social Security Administration is almost 25% short, taxes would need to be raised by almost 25% in order to make up the difference. Suggesting that sort of tax raise is political suicide by all standards.

The typical Washington solution would be to “means test”, which would leave everyone paying taxes but only let people under a certain income level collect the benefits. Essentially this would turn Social Security into another welfare program.

Conclusively, it is minority Americans, who tend to make up the lowest income bracket, that get the worst deal. The resources that they do have get taxed into Social Security, a system that may not even be in place in 20 years time. The fair thing would be to give low-income Americans the option to get out of the Social Security system. This would allow them to take their payroll tax and build their own nest egg.

Chile began giving workers the option to opt-out of their Social Security system thirty years ago. A recent report shows that private Chilean retirement accounts had income equalling 87 percent of what workers made before retirement. American Social Security payouts today don’t even match 50% of pre-retirement income, so why not solve a national dilemma by allowing low-income wage earners the freedom to chose their own retirement plans.

 

Kenneth G. Marks has been practicing personal injury law since he was admitted to the California Bar in 1981. www.KmarksLaw.com