Should Social Security be reformed with personal accounts?
If we don't fix
Social Security, our children will pay the price-literally.
Consider my daughter. At 18, she has just started nursing school
and plans a career working with sick children. Retirement is the
last thing on her mind, but what we do about Social Security will
profoundly affect her future.
In 2018, when my daughter is 31, Social Security will start
spending more in benefits each year than it takes in from payroll
taxes. From then until 2042, it can pay benefits by cashing in the
federal bonds in its trust fund. But once those bonds are gone,
benefits would have to be cut. So when my daughter reaches
retirement, she will get only about 70 percent of the benefits
she's been promised.
Security today, and adding private accounts, can give my daughter
the same sort of retirement security her parents and grandparents
have. A personal retirement account would earn higher returns than
the government-run system, and allow her higher retirement benefits
without higher taxes. She wouldn't need to make risky investments:
By investing part of her Social Security taxes in government bonds,
she could have twice the benefits she's now promised.
Most workers could
do even better. The mix of investments suggested in the President's
plan would probably yield about 4.6 percent annually-about 50
percent more than would be earned by government bonds
All parents want to
leave a better world for their children. Fixing Social Security and
adding personal accounts will help make that happen.
David John is a
senior research fellow for Social Security at the Heritage
First appeared in Upfront magazine