FIXING SOCIAL SECURITY: A GOOD PLAN BEATS NO PLAN
October 18, 2004
Social Security, which was constructed on the premise that life expectancies would remain stagnant and that members of each generation would have enough children to replace themselves, began to tremble under the weight of its promises as life expectancies increased and birth rates declined, says Senior Policy Analyst Matt Moore of the National Center for Policy Analysis.
- The 77 million baby boomers will soon begin retiring; by 2018, Social Security will have to spend $16 billion more on benefit checks than it collects in payroll taxes.
- The shortfall will grow by leaps and bounds, hitting $255 billion in 2030, $430 billion in 2050 and $670 billion in 2070.
In all, the government needs about $11 trillion invested in the bank today, earning interest, to keep the program solvent forever. Needless to say, we don't have it, says Moore.
One option, that does not require raising taxes or slashing benefits, has been proposed by President Bush. His plan would allow younger workers to divert some of the payroll taxes they already pay to create personal retirement accounts.
This would offset some of what the government would otherwise pay them at retirement, reducing the government's obligations and the debt without reducing workers' net benefits. Workers could choose among a few safe funds, similar to the federal thrift savings plan for federal workers, says Moore.
Bush formed a commission to develop ways to structure and integrate a personal investment component into Social Security. According to an analysis of the plan by actuaries at the Social Security Administration, it would require an initial infusion of $3 trillion over the next several decades, but overall it would save about $11 trillion and set the program on a path to fiscal sustainability, says Moore.
Source: Matt Moore, "Social Security -- does it need fixing... A good plan: personal retirement accounts," Fort Worth Star-Telegram, October 18, 2004.
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