Yes

No

1. Poor portfolio management could leave some retirees severely short of funds. Although stocks and bonds have historically done well over the long term, as any investment advisor will tell you, past success isn't a guarantee of future success. At the turn of the millenium the Nasdaq lost over 60 percent of its value as a result of the "tech bubble burst". The Dow index, which includes 30 of the most stable and well-known companies in the country, lost 30 percent of its value. Ironically, a mutual fund made up of stocks from either index would be considered a "well-diversified portfolio". Indeed, the funds of younger workers would most likely be put into smaller growth stocks that make up most of Nasdaq. Thus, imagine a scenario where you spent 30 years accumulating $200,000 in a private account; then, in one bad year, the value of the account dropped to $80,000. This is precisely what would have happened five years ago if private social security accounts had been in place. Hopefully, investment managers have learned from the tech market burst. However, do we want to be risking our retirement livelihood? Another terrorist attack could occur, sending the market into a tailspin. Someone at or near retirement age doesn't have a lot of options if his/her funds are suddenly lost.  The subprime mortgage crisis in 2009 caused the same type of catastrophic drop in the entire stock market.
   
   
2. Wide stock market price fluctuations could leave large groups of retirees in dire straits if their retirement occurs during a downturn. Most stock market experts will point out that the long-term return on stocks has always been positive, despite temporary setbacks now and then. In other words, the market may go up 150 percent one decade, then down 50 percent the next, then up 60 percent the next, then down 25 percent the next. Overall, the return may be positive, but what happens to the retirees that hit age 65 during one of the downturns? Hopefully they were wise enough to gradually put most of their money in safer investments, but there's no guarantee they did the right thing. Consequently, the unlucky retirees may be forced to live with a much smaller nest egg than they planned. The Nasdaq index lost over 60 percent of its value five years ago. It may take 10 or 20 years for it to return to its high value. Unfortunately, the trading technology of today (online transactions, program trading, up-to-the-second information dissemination, etc.) have made the market extremely volatile, which is the very definition of risk.
   
   
3. There are several less complicated fixes to social security available. The money, time, and bureaucratic complexity of private accounts aren't worth the effort and risk when there are much less complicated fixes available. Among these are the following: 1) Remove or raise the cap on taxes subject to social security tax (which currently hovers around $90,000); the social security tax is currently the only tax on income that's regressive. In other words, once your income exceeds $90,000, the more money you make, the less you pay in tax as a percent of income. For example, someone who makes $50,000 pays $6200, or 12.4 percent (including the business share). Someone who makes $100,000 pays about $11,000, or 11 percent. Someone who makes $200,000 also pays about $11,000, or 5.5 percent. 2) Extend the age that benefits begin to be paid out. When social security was first put in place, the average life span was about 67 years. Now, it's in the high 70s and continues to grow. For practical purposes, the age needs to be extended. 3) Use a hybrid of methods such as cutting benefits for upper income individuals, raising the amount of benefits subject to income tax, extending the cap on taxes subject to social security taxes, and so on. A bipartisan effort working with a set of economic experts should be able to craft some kind of effective, less risky plan.
   
   
4. This isn't the best time to address the problem (i.e. there are far more urgent issues). We have several decades to address the social security problem. In the middle of the War on Terror, with tension in Iraq, North Korea, Iran, Libya, Afghanistan, and Syria....in a time of trillion dollar deficits, this is not the best time to tackle the problem.
   
   
5. Even more money will be taken out of an already underfunded system. We all know that the social security system is severely underfunded; it's headed for bankruptcy sometime in the 2040s. Implementing private accounts will take 4 percent of the 12.4 percent taxes from every worker out of the trust fund. Thus, almost a 3rd of the revenue generated by social security taxes will be removed. Drastic benefit cuts or increased taxes will have to occur even sooner, which is a recipe for disaster.
   
   
6. Current IRA's and 401k's offer essentially the same benefits as social security private accounts. All of financial benefits of private accounts--market investment, estate transferability, etc.--are already available in existing retirement investment vehicles. The main reason these options were set up in the first place was to supplement the social security system. Setting up private social security accounts will essentially provide a certain amount of redundancy, which isn't worth the cost and risk.
   
   
7. The transition costs of setting up private accounts would be prohibitively high and severely add to an exploding deficit. As previously discussed, almost a 3rd of revenue generated from social security taxes would be removed immediately. In addition, the tax and bureaucratic headache of setting up such a system would be a nightmare. The transition costs of setting up private accounts could add over a trillion dollars to a deficit that is already at a $1.5 tillion-per-year level. This is way too much of a burden to leave future generations.

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