This is how
NY Times starts today's installment on Social Security:
As he stumps for Social Security privatization, President Bush always gets a big round of applause for promising that the money in a private account could be passed on to one's heirs.
If those happy clappers only knew the details.
I think this is one of the most misleading selling points for SS privatization. It is also one of the most "attractive" features. The idea of money belonging to you, not government, meaning you can spend it the way you like, leave it to your kids...is kind of attractive on it's own, but it is a TOTAL LIE!
Below the fold there is a summary of what those who are cheering don't know (per NY Times article):
Jump...
- You can't start spending the money in your private account until after you bought an annuity (which is a financial contract in which you hand over a lump-sum payment and, in return, get a monthly stream of income for life. Life after retirement anyway...).
- You can't make your own decision on the size of your annuity. The government would require that annuities be large enough to keep recipients above the poverty line (so you probably will have to use most, if not all, of your private account money to buy it)
- The less you had to start with, the less you'd have left over after buying the mandatory annuity.
- Even if you died immediately after retirement, the most your heirs would inherit would be the amount that remained in your private account after you had paid for the mandatory annuity (you can see by now that remaining money will be almost nothing to nothing).
- Low- and middle-income earners, who may not have all that much to leave to their heirs, are exactly the people who would have to use the largest share of their accounts to buy annuities.
- Also there is no telling what happens to your private account if you die before retirement. (the fact that Bush is avoiding this issue altogether is the best indicator that you shouldn't expect anything good here)
- And, of course, to "pay" for the privatization your traditional benefits will be cut by amount of your contributions to private account + interest.
This is no secret by now that according to Bush's vague plan the total of what you will get from your private account + reduced benefits will be less that what you would get from traditional SS otherwise. But some people are still enthusiastic about "owning" their private accounts.
Bush's selling point of ownership should be DESTROYED. This is a fake ownership, period.
