There are only three real solutions to Social Security’s rapidly approaching fiscal problems: raise taxes, reduce spending, or make the current payroll taxes work harder by investing them through some form of personal retirement account (PRA).
Establishing PRAs is the only solution that will also give future retirees the option to receive an improved standard of living in retirement. These accounts would give them more control over how to structure their income and allow them to build a nest egg that could be used for emergencies during retirement, used to start a business, or left to their families. However, establishing PRAs will be complex and—as experience from other countries shows— will require careful planning.
These following principles are essential to any successful reform of Social Security:
- Fix Social Security now; future generations deserve a prosperous and sustainable Social Security program.
- Act responsibly to financially secure the program without dampening the US economy with enormous tax increases.
- Allow young workers the opportunity to take full advantage of the creativity and vitality of the US economy by establishing voluntary Personal Retirement Accounts.
- Ensure that even investment amateurs will prosper by creating a low maintenance account structure that diversifies risk and locks in earnings as the investor nears retirement.
- Secure such accounts within a framework of property rights that will allow them to control their own retirement plans and that will protect workers from arbitrary political decisions that might harm their financial security.
- Strengthen family bonds and give younger workers of humble means a jumpstart on life by allowing PRA funds to be fully transferable as bequests to the children or grandchildren of the deceased. Those who die before or shortly after retiring should not lose the tens of thousands of dollars they paid into Social Security. Their families deserve better.
- Preserve in their entirety the promised benefits of seniors, those approaching retirement, and the disabled.
- Guarantee a minimum, above-poverty government benefit for all future retirees.
- Create a sensible plan to fund the transition while recognizing that despite the cost a reformed Social Security would be far more secure, more prosperous, and less costly than the current system of empty promises.
For more detail on how these principles might be carries out, read David C. John's "How To Fix Social Security."