Social Security Rate of Return v. Market - Privatization Seems Better for Everyone
First, look at the rates of return posted by Social Security, per the Social Security Administration (go to page 6 of the PDF)
Next, look at the rates of return posted by the market .
What can we see.
First, social security:
The highest return is earned by 1 earner very low-income couples where the earner was born in 1920 (9.07%). Moving to people who have not yet hit retirement age (that is, people born in 1949), the highest rate of return is, again, for the "Very Low Income", single earner couple: 6.59%
Note, "Very low" means $10,000 per year, or so, in annual income. For "low income" ($18,182) recipients, it's single earner couples, who earn a 5.45% return.
Rates of return go down from there. Two-earner couples in the low, medium, high and maximum brackets all earn rates of return in the 3% range or lower. Singles don't do much better.
Bottom line - nobody gets a particularly good ROI in social security.
Now compare that to the market. Looking at that post, the average rate of return over all 35 year periods over the last 100 years is 9+%
More, though it's hard to tell exactly from the chart, the minimum rate of return over a 35-year period (that is, if you started counting from the start of the worst 35-year period in market history over the past 100 years - which would include the Great Depression) seems to be well above the 3% range that represents the best returns for most social security recipients.
Of course, those returns don't account for fees charged by mutual funds or money managers, so the spread will be less in real life. But it seems pretty clear that the upside of privatization is that most taxpayers would receive significantly more in benefits from having a private account invested in the market than they would from traditional social security. Combine that with the "Chilean-style" backstop Gingrich proposed (that is, in the unlikely event that someone gets less of a return than the current benefit schedule, the government will make up the difference) and tight regulation (to ensure nobody games that backstop by amping up the risk) and it looks like a real, viable social security fix.