America Needs to Take Social Security Lesson from Chile
In the current Social Security debate, the left often attempts to label those in favor of private accounts as loony. Typically, supporters of the Social Security status quo use scare tactics in efforts to convince the American people that private accounts would be “risky” by “gambling your Social Security on Wall Street.” President Obama pledges that he will “continue to fight to make sure we do not jeopardize the future of Social Security with risky schemes that leave our seniors vulnerable."
In America, how risky would private Social Security accounts be? For this answer, we can look at the country of Chile for some insight. Chile once had a Social Security system similar to what the United States has now. Prior to 1981, Chile’s Social Security system faced a crisis— its Social Security deficit rose to about 25 percent of the country’s economic output. Chile’s efforts to “fix” Social Security by rising the retirement age and cutting benefits proven unsuccessful. Finally, in 1981, Chile emphasized individual liberty by allowing workers the choice to invest in personal Social Security accounts.
In Chile, 93 percent of workers have voluntarily chosen personal accounts rather than government controlled accounts. On the other hand, Congress has trapped all American citizens in the compulsory government run Social Security with no other retirement savings options. Those Chileans who opt for a personal account contribute 10 percent of their wages to one of 20 pension funds of their choice. Unlike the United States, Chileans are able to pass the remaining balance in their pension funds to loved ones upon their death.
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