Privatization

Individual Accounts

The real issues here are funding and control over how the money is invested. The current system is, in many ways often ignored, like a bank account. The "depositer" makes regular payments into the account and, when the time comes to withdraw funds, the amount that may be withdrawn is based on the amount deposited. While the money is in the bank (or trust fund), it is not kept separate from the deposits of others and, in fact, the bank uses the money to earn a return so it can pay interest.

At the same time, we shouldn't overplay the analogy. The bank takes your money and invests it with the expectation the money will be repaid. Social Security uses the money to pay benefits, with the expectation that future deposits will be available to pay current depositers.

Under privatization, the assumption is that your own money will be available to make the payments -- and the amount of those payments will rely largely on the amount deposited and the investment return on the specific account.