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Bumpy Stock Market Spotlights Concerns about Privatizing Social Security

The stock market's wild swings and record drop in August are being cited as reasons for Congress not to consider even partial privatization of Social Security. Credit: MarhsallN20/Wikimedia Commons
The stock market's wild swings and record drop in August are being cited as reasons for Congress not to consider even partial privatization of Social Security. Credit: MarhsallN20/Wikimedia Commons
September 8, 2015

CONCORD, N.H. - Many Granite Staters will be keeping a watchful eye as the stock market gets back into action today and some say recent record drops in the market spotlight the dangers of even partially privatizing Social Security.

William Anderson, president with Anderson Financial Services in Canterbury, says there's a lot to like about the market and the American economy in the long run. At the same time, he believes it would be a mistake to dismantle Social Security and replace it with privatized investment in the stock market.

"If you don't have a safety net and you're unlucky enough to retire when the market is going down, and you still need to draw five, six percent on that, you're going to get clobbered and you're going to run out of money," says Anderson.

Market Watch reports the Dow recorded its worst drop in 17 years in August, posting a decline of more than six percent. Anderson adds Social Security is not perfect and, in his view, does need to be updated.

Some GOP presidential contenders are talking privatization. At a summer town hall meeting in Derry, former Florida Governor Jeb Bush said he thinks the next president will need to privatize Social Security. Dean Baker is co-director at the Center for Economic and Policy Research disagrees. He says the market is fine for supplemental retirement income, but not as a replacement for Social Security.

"Ideally, people put money aside in a 401k or an IRA; some people do, most people don't," says Baker. "But this is the core income, that's the whole point and if it's dependent on stock returns, then it's not a secure income. There's just no way around that."

Baker says Social Security's disability fund does require some action in 2016, but he notes it isn't an insurmountable task.

"The disability fund actually does face a shortfall next year," he says. "That means Congress has to do something, and there's no agreement on what that's going to be. The Republicans are really big on saying they want cuts."

Baker predicts some symbolic cuts will be offered up and then Congress will do what it has done in the past, reallocate money from the larger, retirement benefit fund to cover the pending shortfall.

Mike Clifford, Public News Service - NH