We Might Learn From Social Security Alternatives In Texas

A Wall Street Journal article looked at the suggestion by Texas Governor and hopeful Republican presidential nominee Rick Perry that several counties in Texas have already solved the Social Security problem. Three counties in the Lone Star State left Social Security and have been running their own personal retirement and disability accounts for the past 30 years. Their success has some wondering whether we might be able to learn from them. If you have any experience dealing with alternative programs, we welcome your thoughts below.

At least at the start, the systems in place in the three Texas counties somewhat resemble Social Security. Workers pay 6.2 percent in, and the county matches it. But, after that, financial institutions take control of the money and pay an interest rate on it. The institutions paid around 7 percent on it during the 1990s, and, on average, 5 percent over the past decade.

Workers enjoy several other advantages with the alternate plans. If a worker passes away, he or she owns the account, so the money goes to the deceased worker’s estate. With Social Security, there are death benefits that go to a deceased worker’s family, but the benefits are just a fraction of what the worker paid into the system over the course of his or her lifetime. All the money that the worker paid into Social Security does not go to his heirs.

Additionally, the disability benefits process in these counties is more streamlined. The counties begin paying disability benefits immediately upon injury versus the lengthy process that many disability applicants have to endure when they apply for benefits through Social Security.

These all sound like advantages for switching to a similar system on the federal level, but implementing it on a nationwide scale might not be so easy. Many public workers like teachers and state employees currently are a part of an alternative to Social Security. If you or a family member has experience with these accounts or the disability benefits pros and cons of the alternatives, please leave your comments after the post.


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