Saving and Rettenmaier: Social Security Privatization Can Be Win-Win

2 Nov 2015 | ENTITLEMENTS

Thomas Saving, Andrew Rettenmaier and Liqun Liu have produced a first-of-its kind calculation of the value of Social Security to young people in light of the political uncertainty about its future. They conclude that a 21-year-old earning the average wage with a moderate degree of risk averseness would be better off if he could completely opt out of the system by paying a 5.5% payroll tax for the remainder of his work life. That means he would forgo all future Social Security benefits and avoid all future Social Security taxes, including the current 12.4% tax he and his employer are now paying.

The exit fee he and others would pay would be enough to keep the system solvent and with the payroll tax savings the worker could invest and have better privately financed benefits than under Social Security. Privatization, in other words can be win-win. There do not have to be any losers. This is a remarkable study.

John C. Goodman is President of the Goodman Institute and Senior Fellow at The Independent Institute. His books include the soon-to-be-published updated edition of Priceless: Curing the Healthcare Crisis, the widely acclaimed A Better Choice: Healthcare Solutions for America, and New Way to Care: Social Protections that Put Families First. The Wall Street Journal and National Journal, among other media, have called him the “Father of Health Savings Accounts.”