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.
Younger workers are facing a crisis in Social Security. Most workers under the age of 30 can expect to receive less than a 1% rate of return from the system. They need to save in capital markets using personal accounts in order to receive a higher rate of return. In turn, stocks must perform at the highest levels of value in order to maximize return. Recent data from the American Shareholders Association shows that after the top rate on dividends and capital gains was cut to 15%, shareholder wealth soared by $4 trillion. Interestingly, the advantage was greater in tax-free accounts like 401(k) plans than in taxable brokerage accounts. This shows that underlying value increases in the stock market are more important than the nature of the account itself. PRAs would have the same dynamic as tax-advantaged accounts, and could expect to get a high rate of return from the current low taxation of capital, assuming the rates are made permanent.
The system has a problem, and we need to fix it. Personal accounts are the solution.
Lower Taxes on Capital Will Help Restore Social Security Solvency
Source: American Shareholders Association and the Federal Reserve