Building a Better Social Security System

The New York Times started the discussion by "accidentally admitting" that the Netherland's privatized pension system is a more secure, reliable system than the American government-run system, and Dan Mitchell @ thefederalist.com carries it forward.

Under the Dutch system:

• each generation pays its own retirement costs through private savings and private investments in diversified, professionally-run pension funds (unlike the US, which is based on inter-generational redistribution);
• annual worker savings are government-mandated, typically about 18% of workers' pay (the American Social Security system is roughly 16.4%);
• government doesn't control—and can't access—any of those pension funds (unlike the American system which is wholly controlled and owned by the federal government);
• workers' incomes used to build retirement accounts are taxed only once (similar to American Individual Retirement Accounts):  no tax is levied on pension contributions, and pension funds' investment performance isn't taxed; pension benefits are taxed only when their owners receive them; and
• Dutch retirement plans are intended to amount to about 70 percent of workers' lifetime pay (compared to just 40 percent of American worker's income in retirement).

Mitchell argues, that while there are some things about the Dutch market-based system that could be improved,

I would gladly trade the U.S. Social Security system for the Dutch mandatory pension System. An imperfect system based on private savings is always a better bet than a perfectly terrible tax-and-transfer scheme. For more information, here's the video I narrated explaining why personal retirement accounts are far superior to government-run schemes such as Social Security.

Mitchell adds that, in his estimation, the best role model is Australia's pension system.