NCPA - National Center for Policy Analysis

Personal Retirement Accounts in Social Security Reform

February 19, 2004

Social Security does not reflect the needs of 21st century families. Further, due to policies established in the 1930s, many women are unfairly penalized for work. These problems should be addressed during the process of reforming Social Security by allowing couples to invest some of their payroll taxes in personal retirement accounts, says Matt Moore, a senior policy analyst with the National Center for Policy Analysis.

Even if Social Security's rules had been modernized to reflect our changing society, women would still face an uncertain retirement because of Social Security's shaky future. Personal Retirement Accounts (PRAs) are a potential reform to the existing Social Security system, says Moore:

  • Like IRAs or 401(k)s, PRAs would allow workers to save and invest for the future.
  • Part of workers' payroll taxes would be deposited in personal accounts to prefund some of their retirement benefits, while the rest would continue to support current retirees.
  • Under this plan, personal account balances would continue to earn interest whether or not both married partners were continually employed.
  • As with Social Security benefits, account funds would be divided equally between husband and wife.

Additionally, the government would guarantee that no retiree or survivor would be worse off under the new system than they would have been under the old.

Finally, in the case of death, the PRA would become part of the spouse's estate and could be inherited by the survivor, says Moore.

Source: Matt Moore, Anna Frederick and Adrienne Aldredge, "Social Security, Women and Working Families," Brief Analysis No. 466, National Center for Policy Analysis, February 19, 2004.


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