The situation is more grim for America's youngest workers who can expect a negative return on their money, according to the non-partisan Tax Foundation. On the other hand, the average annual real return on U.S. stocks from 1926 through 1996 was 7.56 percent. Even very low-risk investments, such as government bonds, typically yield a 3 or 4 percent return. Either way, it's easy to come out ahead of Social Security. Of course workers who think stocks are scary could put their money into low-risk government bonds, which would still provide greater benefits than Social Security.
Personal accounts have more benefits than just higher retirement income.
A major benefit is that each account would be the worker's personal property. That means that if a worker should die before age 65, she could leave her nest egg to her spouse or children or the local church. The money could be used for funeral expenses and for her grandchildren's education. With Social Security, a woman may work her whole life and, if she dies before retirement, all her years of paying taxes into the system are lost. Neither she nor her family members will ever see a dime of her hard-earned money.