"Even a mandatory Ponzi scheme like Social Security can fail if it cannot rustle up enough new entrants. You can force young people into Social Security, but if there just aren't enough young people in existence to support current beneficiaries, the system will collapse anyway. When Social Security began making monthly distributions in 1940, there were 160 workers for every senior receiving benefits. In 1950, there were 16.5; today, three; in 20 years, there will be but two. Now, the average senior receives in Social Security about a third of what the average worker makes. Applying that ratio retroactively, this means that in 1940, the average worker had to pay only 0.2 percent of his salary to sustain the older folks of his time; in 1950, 2 percent; today, 11 percent; in 20 years, 17 percent. This is a staggering sum, considering that it is apart from all the other taxes he pays to sustain other functions of government, such as Medicare whose costs are exploding. The Treasury already steps in and borrows the money required to cover the gap between what workers pay into Social Security and what seniors take out. When young people were plentiful, Social Security produced a surplus. Starting now and for decades to come, it will add to the deficit, increasingly so as the population ages. Demography is destiny."
1. A safety net consisting of means –tested Government age pension system. (We have age pension system but as of yet no real means-test system but for now let us assume that we do.)2. Private savings generated through compulsory contributions to a upscale or super type system. Currently compulsory contributions are required by Social Security system but one could hardly consider them savings since they are immediately “stolen” by the treasury. In this system the employee would contribute a set percentage of their income through their employer to a private savings plan.3. Voluntary savings through this upscale or super type system. Employees would be allowed to contribute to this plan outside of the compulsory contributions.
The compulsory system would turn America into a “shareholder” society even under modest economic growth. Under a buoyant economy more workers would become more involved in the voluntary system and take much more interest in their future.
Those making under a certain monthly wage, say $450 to $600 per month, those under 18 and those over age 70 would not fall under the upscale or super version of the savings guarantee plan. That eliminates the argument that such a program would hurt the young who must or desire to take part time work. It also does not inhibit those over the retirement age from working if they so desire and being penalized as they currently are if they make over a certain amount of income.
Individuals can choose to make voluntary contributions to the fund and receive tax benefits for doing so.