Social Security cannot afford to pay all of the benefits it has promised. Beginning in 2017, it will run cash deficits that get bigger every year.

Opponents of personal accounts all seem to think that the American people are totally irresponsible with their retirement savings, and therefore cannot be trusted to manage even a heavily-restricted personal account. Doomsday scenarios of near retirees losing their entire stock-heavy nest egg in the next market crash are sensationalized for the gullible. The actual experience of IRA and 401(k) account holders, though, demonstrates that Americans are rational with their asset allocation. The chart below shows the actual bond asset allocation of savers in Vanguard retirement accounts. The actual percentage of bonds in nest eggs closely corresponds to the “lifecycle” rule of thumb that a retirement nest egg should have a bond percentage roughly equal to the account-holder’s age. Americans can be trusted to diversify out of stocks and into bonds as retirement approaches—experience in IRA and 401(k) choices prove this.

Social Security has a problem, and we need to fix it. Personal accounts are the solution.

Americans Save for Retirement In a Responsible Manner Today
Source: Vanguard Retirement Report