Is this the reason why Bush wanted to "Privatize" Social Security?

[BabbleOn]

Your 401(K) plan is actually a privatization of the "defined benefit plan" type of guaranteed pension that, for instance Postal Workers and other people working for the U.S. Government receive, and which was the primary retirement plan for most workers up until the present times. It's useful to think of the present Social Security Plan as a "Defined Benefit" type of plan, and Sen. McCain's Proposed Social Security Plan as a "Defined Contribution" type of plan.

Defined Contribution Plan

A defined contribution plan provides an individual account for each participant. The benefits are based on the amount contributed into the plan and are also affected by income, expenses, gains and loses. There are no promises of a set monthly benefit at retirement. Some examples of defined contribution plans include 401(k) plans, 403(b) plans, employee stock ownership plans and profit sharing plans.

Advantages of Defined Contribution Plans

Tax deferred retirement savings medium

Participants usually have a say in how much they choose to save
Can be funded through payroll deductions
Lump sum distributions may be eligible for special 10 year averaging
Participants can benefit from good investment results

Easily understood by participants

Disadvantages of Defined Contribution Plans

Difficult to build a fund for those who enter late in life
Participants bear investment risk (Think Enron)

Defined Benefit Plan

A defined benefit plan promises the participant a specific monthly benefit at retirement and may state this as an exact dollar amount. Monthly benefits could also be calculated through a formula that considers a participants salary and service. Unlike defined contribution plans, the participant is not required to make investment decisions. A defined benefit plan is sometimes referred to as a fully funded pension plan.

Advantages of Defined Benefit Plans

Guaranteed retirement income security for workers
No investment risk to participants
Cost of living adjustments
Not dependant on the participant's ability to save

Disadvantages of Defined Benefit Plans

Difficult to understand by participant
Not beneficial to employees who leave before retirement

More and more employers are moving away from defined benefit plans in favor of the defined contribution plan. Defined benefit plans are complex and very costly for the employer to maintain. The employer must maintain an account for the plan and decide the investments to keep the account growing. A defined contribuition plan requires quite a bit of management by both the employer and the employee but is less costly to the employer in the long run. By choosing a defined contribution plan, the employer puts the responsibility of investing in the hands of the employee.

[Kenneth B]

SS is the best thing for all Americans,don't destroy it.Bush been wrong on lots of things.better it.it does work.

[Avner Eliyahu R]

I guess so.