What happens when people choose badly?

Reader comment on: Sowell on Spending

Submitted by Fred Van Bennekom (Singapore), Apr 13, 2011 00:20

This raises the interesting question of the responsibility of the collective to prevent people from making bad decisions for themselves. To draw a parallel, today when there's a flood and people's homes are destroyed, does the media report, "The homeowners decided not to buy flood insurance"? No, the story goes, "Insurance won't pay for the damage." (Those mean, evil, greedy, heartless insurance companies!!)

I will humbly suggest that making all elderly safety net programs voluntary will backfire. Those who are least sophisticated financially will opt-out. Look at 401K programs, which are voluntary with very lenient individual choice to "borrow" money from one's retirement savings. How will these programs play out?

In 20 years I expect we will have a serious issue of elderly poor. The Boomer generation, of which I am one, will be the first one where many (or most) or us will go to retirement with self-directed retirement savings – and with significant mortgages on their homes. In 20 years I expect we will have a huge number of elderly people trying to live off of social security payments solely once they deplete their all-too-small 401K accounts, maybe while still having mortgage payments. In many cases that will be because of individual choices made during their 40s and 50s.

How will this be portrayed? As a result of individual choices and individual accountability or of poor social policy? I am a fervent believer in individual rights and responsibilities, but I think I can project how elderly poverty will be portrayed in 20 years. What will the backlash be in public policy?

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