Social Security Privatization Plan
June 13, 2003
While a great many studies have demonstrated the wisdom and viability of offering workers the option of personal savings accounts to help finance their retirement years, there has not until now been a specific and detailed reform plan which privatization advocates can rally 'round, says Peter Ferrara, president of the Virginia Club for Growth.
Ferrara's plan would allow workers the freedom to choose to save and invest in their own personal accounts 5 percentage points of the total 12.4 percent Social Security payroll tax (10 percentage points of the tax go to finance retirement benefits).
- On the first $10,000 of wage income, however, this would be doubled to 10 percentage points, including both the employer and employee shares of the tax.
- This would enable lower-income workers to save a higher percentage of their incomes in the accounts than higher-income workers.
- As a result, lower-income workers would gain as much from the accounts as middle- and upper-income workers.
Indeed, exercising such an account option over their entire working lives and earning just standard market investment returns on a diversified portfolio of stocks and bonds, workers across the board would retire with 60 percent to 75 percent more in benefits than Social Security promises, but cannot pay.
Source: Peter Ferrara (International Center for Law and Economics), "Mending Social Security," Washington Times, June 13, 2003.
Browse more articles on Tax and Spending Issues