Are Social Security Private Accounts a Good Deal or Raw Deal for African Americans?

First of all, a private account is the government's attempt to add an ownership component to the system. However, in this case, your ownership rights will be restricted.

I can invest MY money in stocks, bonds, real estate, business, mutual funds and other investment vehicles I choose. Private accounts will likely offer a limited range of choices in nothing but paper assets like stocks, bonds and money market accounts that are managed by large Wall Street brokerages and mutual funds - the so-called experts.

Ownership with restrictions is merely the illusion of ownership. Few things you own will have as many complex rules, restrictions and legal entanglements as private account will have attached to it.

Second, the government is forcing every American to become an investor without committing the resources to raise the level of basic financial literacy in this country. Alan Greenspan has said that basic financial literacy should be taught in our public schools.

Second, the government is forcing everyone to become investors without committing resources to raise the level of financial literacy. Alan Greenspan said that basic financial literacy should be taught in our public schools.

Third, what will the government do should you out-live your private account? Because the account only offers limited ownership not real ownership, I expect that we won't be able to bet their private account at the casino on the day they retire. I do expect the withdrawals from our private accounts to be amortized over a period of time based on something like the average life expectancy. What happens if you are the lucky somebody that lives a long, healthy life to 120 years old? If your account goes broke, what will the government do for you?

Fourth, the new promises are just as shady as the old ones. Private accounts will salvage the system for some time but ultimately will become plagued by their own, new and different challenges that will need to be fixed by a future generation.

So, with all of these reservations, you may wonder why I think that Social Security private accounts are a good for Black Americans. The answer to that is simple math.

Simple Math Reason Number One:
Black males live an average of 66 years. The average Black male now collects one year of full Social Security retirement benefits. The age of full retirement for the under 40 crowd is now set at 67. Watch for proposals to raise that age even more. The average Black female has a life span of 72 years meaning that she collects 5 years of benefits. The average White male and White female have life spans of 76 and 78 years, respectively.

Personally, I would rather pass my life time of Social Security tax dollars on to my children then to old white ladies like we do now under the current system. That is who is getting your benefits now.

Simple Math Reason Number Two:
It is not hard to earn more then the 2% return on investment that Social Security provides now. A money market mutual fund is paying anywhere from 3% - 5% interest at this time. You could easily and safely earn double what Social Security offers.

Simple Math Reason Number Three:
The average Black American has a net worth less then $5,000 and that is only one-tenth of the average White American. Social Security private accounts, because they are form of forced savings, will add to the net worth of Black Americans. All other Americans will see their personal wealth build also so I don't expect that private accounts will close the racial wealth gap. I do believe that private accounts will inject much needed wealth into the accounts of African Americans and we need the boost most of all.

Also, because we don't live as long beyond the retirement age (which I hope will one day change), more of the wealth in our private accounts will get passed to our children, helping them to build wealth. So, a legacy of wealth will begin to grow from the seeds of investment into private accounts.

Simple Math Reason Number Four:
The system is breaking down. We need to start taking complete ownership - and control - for our retirement security.

Partial privatization is a step in the right direction. Even if the step is one small incremental one, we must begin somewhere.

I don't think the destitute and disabled should be left out in the cold without our help and support. I do believe that the truth needs to be told and that no one is telling it today.
So, here is what I have to say: make a plan to provide for your own financial independence, invest heavily into your own financial education, invest your money wisely, prepare for the absolute worst and hope for the absolute best. God bless