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What is Meant by Social Security "Privatization"?

Privatization of Social Security would make the system work more like savings accounts. Instead of pooling resources to protect each other, workers would invest their payroll taxes individually, in personal accounts similar to IRAs, 401(k)s or 457 plans.

Privatization of Social Security would make the system work more like savings accounts. Instead of pooling resources to protect each other, workers would invest their payroll taxes individually, in personal accounts similar to IRAs, 401(k)s or 457 plans.

AFSCME strongly favors personal savings for retirement and has fought for savings plans in the workplace. Savings/investments are an important leg in the “three-legged stool” of retirement income, the others being Social Security and pensions. But Social Security privatization would make the stool wobbly by combining the Social Security and savings legs. Somehow, a two-legged stool doesn’t seem as sturdy.

The stool looks even more wobbly when you consider that the majority of workers retire without pensions and fewer employers now offer them. In fact, two-thirds of Social Security recipients count on Social Security for at least half their income.