College papers academic writing service


Social security should be replaced with a mandatory private pension system

  • But not only are the two completely different in the way that they're funded and structured, the future of both faces different challenges;
  • Read on for more about how the two programs are structured and how each may benefit retirees who have paid into such programs.

Social Security By Barbara A. Friedberg Updated April 26, 2018 — 7: While pensions are typically workplace retirement plans, in which an employer makes contributions to a pool of funds on behalf of employees, Social Security is handled by the federal government and funded through payroll taxes collected from employees and companies. Read on for more about how the two programs are structured and how each may benefit retirees who have paid into such programs. Pensions 101 Before the advent of IRAs and 401 k plans there were pensions.

Your parents and grandparents, if they worked for the same company for many years, may have enjoyed generous pension benefits. Pensions nowadays are known officially as defined-benefit plans because the payment amount you'll receive in retirement is decided or defined in advance.

Social Security Isn’t a Pension

Upon retirementthe employee receives monthly payments. State government employees frequently have pension systems as well. The private pension payout depends upon several factors, such as how long you worked for the employer as well what your salary was. In some cases, you can choose a lump-sum payment or a monthly annuity check.

Retirement Plans: Pensions vs. Social Security

In the past, employers were required to maintain excess pension assets within the plan and were not to use the funds for other expenses. This law was put in place so that when needed by retirees, the money would be available to be paid out to eligible retired individuals.

It also ensured that excess pension monies were available to offset the times when investment returns were lower than expected. In her book How Companies Plunder and Profit from the Nest Eggs of American Workers, Ellen Schultz relates how these changes led many companies to move pension assets into unrelated company coffers. That resulted in a mass downsizing of pension monies and, ultimately, underfunded pension funds.

Pensions 101

Private-sector pensions are gradually becoming obsolete, but 42 million Americans remain covered by them today. The amount of the check varies based on the age at which you begin receiving benefits as well as how many years you worked and the amounts you earned while you were contributing to the program.

Social Security isn't designed to fully replace your income or meet all of your financial needs in retirement. Social Security is funded by a pay-as-you-go system. This means that while you are working, you pay into the system.

How to Make Social Security Work. There are several other distinctions between pensions and Social Security. Social Security offers a disability insurance program that covers workers with enough credits earned through work and payment into the system if they become disabled.

Although spouses may receive a partial pension payment see What are Social Security spousal benefits? Finally, pensions may offer a lump-sum payout upon retirement.

  1. Although spouses may receive a partial pension payment see What are Social Security spousal benefits? Upon retirement , the employee receives monthly payments.
  2. While pensions are typically workplace retirement plans, in which an employer makes contributions to a pool of funds on behalf of employees, Social Security is handled by the federal government and funded through payroll taxes collected from employees and companies. Upon retirement , the employee receives monthly payments.
  3. Your parents and grandparents, if they worked for the same company for many years, may have enjoyed generous pension benefits. Although spouses may receive a partial pension payment see What are Social Security spousal benefits?

This option is not available through the Social Security system. But not only are the two completely different in the way that they're funded and structured, the future of both faces different challenges.

  • Social Security offers a disability insurance program that covers workers with enough credits earned through work and payment into the system if they become disabled;
  • In some cases, you can choose a lump-sum payment or a monthly annuity check;
  • That resulted in a mass downsizing of pension monies and, ultimately, underfunded pension funds;
  • In the past, employers were required to maintain excess pension assets within the plan and were not to use the funds for other expenses;
  • There are several other distinctions between pensions and Social Security;
  • State government employees frequently have pension systems as well.