Chile privatized its Social Security system 20 years ago. [View All]

[Muzzle Tough]

In principle, I am against putting Social Security tax dollars into the stock market.

However, as a practical matter, I do have to acknowledge the success of Chile's privatizaion of its Social Security program.

http://www.bakersfield.com/24hour/world/story/1918710p-9872988c.html

Instead of paying social security taxes and wondering whether the government will ever deliver promised retirement benefits, Chilean workers bankroll their own retirements and manage their nest eggs.

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Two decades after Chile's military dictatorship scrapped the country's broken and bankrupt government-run social security system and replaced it with privatization, forced retirement savings by everyone who gets a regular paycheck is a way of life.

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Still, about 7 million Chileans in the nation of 15 million are now investors in the longest running government-mandated private pension experiment on the planet. They don't pay the government a single peso to fund their social security, and half regularly funnel 10 percent of their income into retirement accounts they both own and decide how to invest.

"The best thing about it is I didn't give my future to the government," retired tax lawyer Juan de Dios de Vergara said while making minor pension changes at an office run by Summa Bansander, owned by Spain's Banco Santander. "I assumed my own risks, made my own decisions and the funds belong to me, so I get the earnings."

Countries from Mexico to Sweden have adopted the system or elements of it amid concerns that government-based social security benefits will be slashed when retirees outnumber contributors.

The Chilean system also helped feed an unprecedented expansion for South America's most market friendly economy, and has drawn attention from President Bush, who has made privatizing part of the U.S. system a top second term goal.

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Pinera compares the underfunded U.S. social security system to the Titanic heading toward an iceberg, saying the Chilean example "shows that a system of personal retirement accounts can work superbly."

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