PSAs and Social Security

The Sans Fromage is confused as to why personal savings accounts are being tied in with Social Security. If personal savings accounts (PSA) are such a good idea why not permit Americans to take 5% of their pretax gross pay and set it aside in a special retirement account. This account does not have to be associated in anyway to social security but would enhance an individual’s available retirement money. Anyone who is thinking that social security will provide for retirement costs is going to be very surprised. Social security was never meant to be a retirement account for people but was meant to be a bare minimum safety net so if people found themselves retired with no money available then social security would provide a small bit of money so they wouldn’t starve. PSAs could be a voluntary thing just like contributions to 401Ks are voluntary. Why hasn’t this option been brought up? Stressing savings programs seems to be a win-win situation for everyone. Maybe tying PSAs to social security allows the huge chunk of money now in the social security system to be opened up to Wall street and to investment firms to get their greedy hands on. Maybe the fact that investment firms contributed heavily to the Bush campaign has something to do with it. The Sans Fromage’s idea to enhance social security would be to allow PSAs and then tax, slightly, any gain earned, over ~5%, from the money in these accounts. This tax would go directly into the social security system. Of course any fees associated with these accounts, like brokerage fees, would be deductible from income tax. This way people could voluntarily gamble their money on stocks and any success would help to build the social security coffers and strengthen that system. If the stock market crashes, as it seems apt to do, social security is not harmed. Tying the safety net of social security in with the stock market seems to be a bad, bad, bad idea. Does anyone remember what happened to their 401Ks post 911? Does anyone remember Enron and WorldCom? Should you put your trust in people like Martha or Ken Lay? If people wish to invest why not allow it, without touching social security. Why not offer T-bills or bond funds just for PSAs? Of course you would have to put some trust in the solvency of the government. With Bush in office maybe that isn’t the best idea.