Opt out of Social Security for racial equity

A recent Reuters headline read, "Yellen, Rice tout economics as key to fixing American inequality."

According to Susan Rice, President Joe Biden's new domestic policy adviser, "The evidence is clear, investing in equity is good for economic growth."

Our new Treasury secretary, Janet Yellen, says, "I believe economic policy can be a potent tool to improve society. We can -- and should -- use it to address inequality, racism ..."

I couldn't agree more.

According to the Federal Reserve's most recent Survey of Consumer Finances, the median wealth of white families is $188,200, compared with $24,100 for Black families.

To the extent that change in government policy can lift the median wealth of Black families, I am for it. The good news is there is such an opportunity.

I have been writing about it for many years. We should give working Americans the option to opt out of Social Security and use the taxes they are paying into it to invest in their own personally owned retirement account.

We'll achieve more racial equity by allowing low-income Americans the opportunity to have more equity in -- ownership of -- America.

A big reason for the huge wealth gap between white and Black families is the huge gap in ownership of equities -- stock -- between white and Black families.

According to the Pew Research Center, 61% of white families have either direct or indirect ownership in stocks. Only 31% of Black families do.

Per the Federal Reserve, among white Americans ages 35 to 54, 65% have at least one retirement account. Among Blacks in this age range, only 44% do.

It is true that median Black household income is also lower than median white household income, meaning Blacks on average have less to save and invest. Which is why giving the option to opt out of Social Security is so vitally important.

Every working American pays 12.4% of their income to Social Security, half taken out of their paycheck and half paid by their employer.

This is a tax, not an investment. The government then uses this tax revenue to recycle and make payments to those currently retired, who themselves paid taxes during their working life.

The Committee to Unleash Prosperity, working with the nonpartisan Tax Foundation, recently calculated what working families at different income levels would have earned at retirement if they could have invested their payroll tax rather than paying into Social Security.

For instance, a low-income couple who started working in 1971 and retired in 2015, where one earner earned 45% of the national median income and the other 25%, would have gotten an annual Social Security benefit of $21,035. If that same couple could have invested 10% of their paychecks in a stock fund over the same period, using actual historic data for this 45-year period, they would have had $738,360 at retirement that could produce $40,610 annual income for them -- almost double what they would get from Social Security.

They would also have the benefits of ownership. They could bequeath what remains to their heirs.

Per the Federal Reserve, 29.9% of white Americans say they have benefited from inheritance or some other family gift. Only 10.1% of Black Americans say they have received an inheritance or family gift.

If Black Americans do not feel part of and invested in the nation, as they should, one reason is that they are disenfranchised by the same government that claims it wants to help.

So, Secretary Yellen, policy adviser Rice, how about getting on board with me? How about showing Black Americans, and all Americans, that you really want to level the playing field?

The Social Security Trustees report that by 2034, the system will have insufficient funds to meet obligations.

Ownership, rather than more government, is the answer.

Now we just need courageous leadership.

Star Parker is president of the Center for Urban Renewal and Education.