overhaul is by the introduction of partially privatizing Social Security. It helps bring Chile social security system out of bankruptcy. In 1981 Chile privatized it social security by requiring their workers to put 10% of their pretax wages in private pension funds. The funds are carefully regulated, and workers can switch among trust fund managers for better returns or lower costs. They also receive periodic statements. Upon their retirement they receive their money to buy annuity. What ever is left can be passed onto their heirs. If there isn’t enough to provide a decent living the government steps in guaranteeing a minimum. Now Chile enjoys a high savings rate well over 20% of their gross domestic product compared to the US’s 3.2%. The Senators plan proposes that 2% of the 12.4% tax would be taken out and placed in private accounts set up by the government. The money would be one’s own personal account with compound interest The Institute for Research on Economics of Taxation (IRET) adds, "that they would not be able to touch that money until they retiree or become disabled. The money is theirs the government would not be allowed to touch it. If that person should die the money would be added to their estate" The Cato Institute (a nonprofit public policy research foundation founded in 1977 whose publication, conferences, and seminars are designed to illuminate private sector, voluntary solutions to social and economic problems) also adds, "that those presently in the workforce would have the option of remaining in the current Social Security system or switching to the new private system. Those entering the workforce after the implementation of the new private system would be required to participate in the new system. Thus the current system would be eventually phased out". The plan also has guidelines to problems and questions that pe...
