The Pros and Cons of Privatizing Social Security
Open Access
- Author:
- Lavella, Allison Marie
- Area of Honors:
- Actuarial Science
- Degree:
- Bachelor of Science
- Document Type:
- Thesis
- Thesis Supervisors:
- Ron Gebhardtsbauer, Thesis Supervisor
Ron Gebhardtsbauer, Thesis Honors Advisor
Lisa Lipowski Posey, Faculty Reader - Keywords:
- Social Security
Privatization - Abstract:
- Social Security is the largest social insurance program in the United States. Each year actuaries and the Social Security Administration evaluate the financial status of the program. In 2015, a review of Social Security showed that Social Security’s finances would not be able to support all of their promised benefits by 2034. Changes must be made to the current program to ensure benefit payments in the future. This paper considers various Social Security reform options policymakers could implement in order to create financial stability within the program. After discussing how the current program works, with an emphasis on the calculation of Social Security retirement benefits, reform options were analyzed. Traditional reform options, including increasing taxes and decreasing benefits, were discussed. Then reform plans involving privatization, or the movement of a portion of Social Security from the public sector to the private sector, were examined. Such reform options include investing Social Security assets in the securities market and incorporating a program of individual retirement accounts. The impact on Social Security’s finances, the likelihood of implementation, and the impact on national savings were considered for each reform option. After considering the different reform options, a plan to reform Social Security through a tax increase while investing in the securities market is proposed.