Privatize Social Security? Ha! Ha! Ha!

Privatizing Social Security was the cornerstone of the Bush Administration’s “plan” to save Social Security.

Remember the “ownership society”- where all Americans would have a stake in Wall Street?

The government bailout of Wall Street last week has put the final nail in the coffin of privatizing social security.

Why do I say that?

Look at the Main Street public’s reaction to this crisis. Many are yanking money out of stocks and running to the banks to yank money out of money market accounts. Imagine millions of Americans doing the same with the trillions in their social security accounts?

But even more striking are the stories coming out of, frankly, just plain bad investing.

Betting on the Banks

Everyone makes investing mistakes, even Warren Buffett for goodness sakes. But when you’re talking about retirement accounts, the mistakes can be devastating.

I’ve already talked about the California man who lost $100,000 of his sons’ college education fund buying Freddie and Fannie at $6 before it tanked.

But there are other similar stories out today about investors close to retirement who put big chunks into Freddie and Fannie (also near $6 a share)- thinking they would hit it big. Instead, their accounts are now down 20% or more and they may have to work several extra years instead of retiring.

And this is what people wanted when Social Security was privatized?

For every “smart” investor- there would be dozens of, let’s put it frankly, “dumb” ones.

With the collapse of Wall Street as we know it- the lure of putting the nation’s retirement accounts into the hands of the financial titans is now gone.

What happens to Social Security now?

With the current financial crisis, the political will to “save” it likely won’t be there for at least several years. Yet, social security lurches towards insolvency in less than 10 years.

I don’t mean to rain on people’s parades given the current financial crisis. But another one is fast approaching.

If privatizing Social Security is off the table- what will replace it? How can Americans save more for retirement?

According to the Wall Street Journal- the Baby Boomers are going to get hit hard. They have little in savings - and many were planning on their homes to provide for retirement. But that plan has now changed.

Consider: Less than one-quarter of workers age 55 and older — just 23% — have savings and investments totaling $250,000 or more, according to a study published in April by the Employee Benefit Research Institute in Washington. About 60% have less than $100,000.

There are lots of changes coming in the world of finance. Privatizing social security will NOT be one of them.