Why Social Security Is the Best Retirement Saving Vehicle

Why Social Security Is the Best Retirement Saving Vehicle – Bloomberg:

Although Social Security could theoretically be financed through general revenue (and was, in part, during the payroll tax holiday in 2011 and 2012), there is strong political pressure to ensure that Federal Insurance Contributions Act tax revenue and benefits paid stay in line over the long term. This means that any major benefit increase would have to be accompanied by a FICA tax increase, ensuring that benefits do not rise above a level that is fiscally and politically sustainable.

So what is the policy upshot? One option, as I argued last week, is to expand Social Security to finance a larger share of retirement costs. Another option is to transform defined benefit and defined contribution systems so they mimic Social Security’s virtues: That is, they would invest in lower-risk assets expected to grow roughly in line with GDP or wages and not chase yield by taking on excess risk.

Despite the rhetoric commonly heard from conservatives, libertarians, and conservatives who like to call themselves libertarians, when it comes to the risk involved in financing Social Security is actually an example for other retirement systems to follow.

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