Good thread topic. However, I think you are putting SS on a bit of a pedestal that it doesn't deserve. As I understand it, there is no 'lock box'; SS is funded out of the general fund, and we are now spending 1.4x what we take in. So I don't think we can view SS as low risk as you imply. This past week, the President said he couldn't guarantee that SS checks would go out, and the debt deal we got projects
increasing debt - it just keeps getting worse. The 'cuts' are just reduction in the
growth of the debt, not real cuts as we would think of them.
Put another way - it's not really apples-to-apples to compare a privatized account with the govt SS 'account' because there is a lot of smoke-and-mirrors there. That's one of my problems with it.
I think the govt could (with lots of conditions and external checks and balances) be in a good position to handle the
distribution of that private account once it has been accumulated. They should be able to provide the annuity side of it, averaging out that longevity risk for us, at near zero cost. We should have the option of annuitizing some/all of it, so we could decide to pass some on to heirs if that is desired. Or even just let the actuarial rules apply to choose to pay $X or X% at death to a beneficiary, at whatever cost (reduced benefit) is needed.
We would either need some sort of forced savings, and/or some real education on this topic. Even to the point of signing a waiver if you don't have enough withheld form your paycheck. Something like
"I, ERD50 have read and understand that I am not saving enough for my retirement. I have other sufficient sources of retirement funding, and/or agree that due to my lack of funding my public retirement account, I will forego future retirement government support. I agree to live under the bridge in a cardboard box if it comes to that." - OK, not quite like that, but close.
Another way to view this whole things is - it seems odd to think of SS as providing any 'better deal' than anything else (other than the ability to spread longevity risk). It is our money going in, and our money coming out. No value is created anywhere along the line. Where is the 'magic' in SS?
Maybe 'magic' is a good word, it seems to me that much of what you describe as benefits, are really 'sleight of hand tricks' - when you say "no stock market risk", really? The economy has tanked, govt revenues are down because of that, govt spending is up to pay unemployment and attempts to stimulate the economy... so the funds available to pay those SS checks are dwindling. There is definitely risk there, it is just sort of hidden by the accounting. At least that is how it appears to me.
That's not meant to criticize what you wrote, I just think it deserves to be looked at in a different light. Discuss
-ERD50