President Obama has proposed a reduction in the level of Social Security benefits through the use of something called Chained CPI. Despite bipartisan agreement that Social Security needs to be reformed, Obama’s proposal has gone over like a lead balloon (especially on the left). See the chart below for an illustration on the scope of the fiscal problem with Social Security:
What nobody is really talking about is just how crappy Social Security really is. According to Michael Tanner of the Cato Institute (writing in October 2008 when the stock market was in a deep decline):
Assume you had invested a hypothetical $100 in 1965. The redline shows what would have happened if that money had annually earned Social Security’s imputed rate of return (about 2.2 percent for someone retiring today). The blue line represents what would have happened if you earned the actual market return. If you invested $100 in 1965 at Social Security’s rate of return, today you would have $254.91. But if you invested that $100 in the market, today, even with the current down market, you would have $4,135.92.
See the image below for details.
Private accounts are STILL the best option for America’s retirement system.