Privatizing

Since 1986 all federal employees have had a tax deferred savings plan in addition to their federal pension and social security. It is similar to a private company 401k plan. They can put up to $18,000 per year into a tax deferred plan where the contribution is before tax and the gain accumulates tax deferred and all the money is taxed at retirement when it is withdrawn. There are five investment accounts and members can move their money around in these accounts. Employee surveys indicate that they are very satisfied with this arrangement. I bring this up because there are discussions about privatizing social security and the investment plan would look like the federal savings plan. Employees pay in 6.2% of their salary into social security and the employer matches that. About one-third of this total goes to survivor and disability benefits leaving about 8% to invest. The advantage of this plan is that any money left over will pass to your heirs upon your death. On average people collect about what they pay into social security but as usual averages do not tell the whole story. Right now white females collect much more than they pay in and black males much less. A black male dies before using up what he has paid in and the remainder reverts to the government. With a privatized plan this excess money would pass to the black man’s heirs. Life expectancy for black males is 71 and for white females 81. For the average black man that would mean passing on $60,000. Surprisingly black leaders oppose the privatizing plan.