NCPA - National Center for Policy Analysis

Personal Accounts for Social Security

December 1, 2003

Personal investment accounts for Social Security would allow workers to shift a portion of their Social Security payroll taxes into accounts to finance a proportionate share of their future Social Security retirement benefits, explains Peter Ferrara, of the International Center For Law And Economics.

Washington has assumed that the greatest amount that could be feasibly put into personal accounts is two percentage points of the 12.4 percent Social Security payroll tax. However, the Social Security Administration (SSA) is releasing a proposal for much larger personal accounts, averaging 6.4 percentage points of the payroll tax. That score shows that such large personal accounts would achieve permanent solvency for Social Security, without benefit cuts or tax increases. Moreover, it shows that the transition financing burdens of such reform would be quite manageable. According to Ferrara:

  • It would allow workers to shift five percentage points of the payroll tax into their own personal account, but on the first $10,000 of income that would be doubled to 10 percentage points.
  • This makes the proposal quite progressive, with lower income workers able to devote a higher percentage of their Social Security taxes to the account.
  • At standard, long-term, market-investment returns, these accounts would be large enough to pay workers substantially more than Social Security promises, but cannot pay.

All these tremendous benefits of the reform result because it involves shifting from the enormous, purely redistributive, pay-as-you-go program of today to an enormous real savings and investment program that sharply increases national wealth, income and economic growth.

Source: Peter Ferrara, "Let the Campaign Begin," Wall Street Journal, December 1, 2003.

For text (WSJ subscription required),,SB107025130170078300,00.html


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