The following question comes from Reddit:

If we ‘privatize’ Social Security, what would happen to people that recklessly invest their retirement and lose it?

First, in the question, there is an unfounded premise about risk as in: government control of our retirement funds entail no risk.

Our state public pension funds are underfunded by $1 trillion, because of failure to actually fund them, low interest rates caused by the Fed, and in some cases bad or politicized investment management. Meanwhile federal retirement programs are underfunded, increasingly being supported from general revenue, and wholly dependent upon future taxpayers to somehow pay bonds held in the “trust” funds.

Instead of millions of potential points of failure, government control creates a few points of failure that will impact millions of people; see historical pension crises in Russia, Greece, and other European government-centric retirement schemes.

Returning to the original question, let us clarify another premise that should be more explicit; these poor investment returns are the consequence of an individual being stupid, ignorant, or having bad luck from a failure to manage investment risk.

Finally, in the question, there is the erroneous “What do we do…” premise. We don’t have to do anything, but we could choose to do something. If we choose to do something, should we implement that action through force (government) or through individual voluntary choice (civil society)?

The current system is based upon force…force individuals to pay for future retirement benefit eligibility and force other individuals to pay to supplement retirement benefits for those that did not make enough money during their productive years; more exactly, it is to force the productive young to give money to the idle and relatively wealthy elderly.

So what would a wholly private alternative be? Individuals would be free to not retire if they could not support themselves through their own savings (augmented by eliminating payroll taxes) or the aid of loved ones. Those few who are too physically or mentally disabled to work would be dependent upon voluntary charity provided through civil society, but not government.