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Introduction
Recently there have been many debates about the appropriateness of the current state-financed social security system. The critics speak about its approaching insolvency as, with the aging of the population, there are more people receiving the social security benefits than contributing to the system. The need to review the existing system has long been overdue. This paper hypothesizes that the current social security system should be replaced by a mandatory private system, allowing people to control their future retirement benefits.
Why social security system should be replaced
With the impending insolvency of the current system, there has been an urgent need for reforms. A mandatory private social security system could be a worthy option of the existing state of affairs since it would allow reducing the social security debt and avoid the heavy borrowing needed to keep the state system running (Hadley and Hatch, 2018). While the current system is deeply subsidized and requires a large part of governmental spending, the private system allows injecting money into the economy through funds and conventional financial instruments (Keller, 2020). Instead of being a burden on governmental spending, the system works to create additional value and boost the economy.
Secondly, in the private social security system, the people get control of their money and clear mechanisms to see how it is formed and invested. Instead of uncertainty about what sum of money a person can count on retirement, a private social security system creates a transparent mechanism to assume full control over his or her future retirement benefits (Manor and Ratajczak, 2020). Thirdly, with private social security system, retirees can have more money when they retire, putting it into conventional financial instruments such as governmental bonds. The cost-effectiveness of the current system is low, and as a rule necessitates additional savings to keep up the level of life people got used to when they retire.
Conclusion
The proposed change from the current state-financed social security system to a private one would provide people with a reliable, cost-effective, and transparent mechanism to form their future retirement benefits. The change to a new system would allow avoiding the current systems approaching insolvency and reduce heavy governmental spending on social sphere. Moreover, the new system would allow people to assume control of their future benefits promoting financial literacy in the society. The current social security system should not be saved bur replace with a private one.
Works Cited
Hadley, Roger, and Stephen Hatch. Social Welfare and the Failure of the State: Centralised Social Services and Participatory Alternatives. Routledge, 2018.
Keller, Katarina. The Economic Effects of Private Social Security Accounts. International Journal of Economics and Business Research, vol. 19, 2020, pp. 335-354.
Manor, Moshe, and Joanna Ratajczak. Shift to Private Pension System: The Case of Poland and Israel. Economics and Business Review, vol. 6, no. 1, 2020.
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