Dana George, The Motley Fool

Wed, Jun 25, 2025, 2:45 AM4 min read

• If Social Security privatization ever becomes a reality, workers will take on a much larger role in preparing for retirement.

• IRAs would likely become a staple in more investor portfolios following privatization.

• The financial know-how required to make the most of investing could become a by-product of privatization.

• The $23,760 Social Security bonus most retirees completely overlook ›

Social Security privatization refers to a proposal that shifts the current government-run system to one where a portion of the money you normally pay in Social Security taxes would be diverted to a personal investment account that you would be responsible for managing. The goal is to allow Americans to maximize Social Security dollars.

Although the idea has been around for decades, it's taken on new heat as some worry DOGE cuts to the Social Security Administration (SSA) are the first steps in forcing privatization.

There's no denying that saving for retirement as we know it would change if Social Security were ever privatized. Also impacted would be the value we put on other methods of savings, like individual retirement accounts (IRAs). Here's how some of those changes might present themselves.

There's nothing like the knowledge that your Social Security benefits aren't going to be as much as expected to inspire you to find another way to build retirement savings. Chances are, IRAs will become even more critical as a primary vehicle for saving, helping you bridge the gap between income needs and resources.

Some may make IRAs their primary retirement funding source, as IRAs tend to provide more investment options than 401(k)s and other employer-sponsored retirement plans.

If lawmakers do ever decide the current Social Security system needs an overhaul, there's a good chance they'll at least discuss increasing IRA contribution limits as a way for individual investors to bolster their retirement funds. While they're at it, Congress could consider enhancing catch-up options for older workers.

IRAs offer such a wide range of investment options, you may base your investment decisions on what works best in tandem with other investment types, like a 401(k) and annuities. It's easier to come up with a balanced portfolio when you spread assets across several investment types. For example, if you have an employer-sponsored retirement plan that's heavy on higher-growth assets like stocks or real estate, you may want to balance those with a bond-heavy IRA.