Will Social Security Be Rescued By a Mandatory Pension Plan?

Will Social Security Be Rescued By a Mandatory Pension Plan

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As our leaders in Washington battle it out over how to decrease spending in efforts to contain this mountainous atrocity we refer to as "The Deficit", the strain between revenue, taxation, and spending will eventually arrive at the door of the Social Security Administration. It has been well documented that the system may be headed for doomsday without drastic reform, and with this in mind, a number of projected solutions are likely to emerge.

One such strategy is derived from a model employed by other countries: a mandatory retirement savings plan. The program, if instituted, would be designed to relieve building pressure on the Social Security reserves. Considered an extreme measure by some, proponents of the measure argue that this forced savings would provide for increased financial security in old age. Although implementation of this proposal will present some difficulties, with the financial future of many retirees currently in doubt, the plan may merit some consideration.

The chief premise of the plan would compel all workers to set aside 3-10% of their earnings into a portfolio that is highly diversified with minimal management fees. The savings would be collected via a payroll deduction and put into a managed fund. Some suggest a fully managed portfolio administered by a government agency while others favor allowing the worker greater control over the investment options. The general goal of the program is to provide the retiree a means of supplementing their Social Security thereby reducing the burden on the system as a whole. However, should the Social Security system crumple as some do predict, the forced savings plan will lessen the blow to our nation's growing population of individuals over the age of 65.

Dating back to the 1700's, our country does not react well to something that is forced upon them, good or bad. However, while American's tend to be defiant to anything deemed to be "mandatory", one can not argue that the current voluntary based retirement programs are not attaining the needed results. Simply put, employees are doing a poor job of planning and preparing for their retirement needs. According to 2009 figures from the Employee Benefits Research Institute, only 59 percent of workers had access to employer based pension or retirement programs and only 45 percent were actually participating in them. A forced plan would go further towards the guarantee of financial security at retirement. While it is true that mandated answers are not always the best solutions, one must keep in mind that this initiative would not be a tax, but rather a savings program.

Whether you support or oppose this model is not as imperative as the realization that appropriate financial planning is essential for you and your family. As a society, this realization has become sobering to say the least. The rising cost of living and the rapid escalation in the cost of healthcare demands planning and concern. Getting solid advice from a seasoned financial advisor makes sense at any age. Active portfolio management from an skilled professional can place you into a position to take pleasure in your retirement years, rather than fear them.

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