WASHINGTON, MARCH 3, 2005-Personal retirement accounts created from a portion of the payroll taxes workers now pay would let a typical New Jersey couple build a $115,000 retirement nest egg, according to a report released today by The Heritage Foundation.

"New Jersey workers and their families would get a much better deal from Social Security if the system let them channel some of their payroll taxes into personal accounts," said lead author William Beach.

The report found that, under the current system, a typical New Jersey couple born in 1970 can expect to reap only a .65 percent annual return on their Social Security tax investment-far less than what that money would earn if invested in a certificate of deposit at a local bank.

The study projected that if just part of those taxes were invested in a conservative mutual fund of stocks and bonds, the couple would amass personal retirement savings large enough to assure (through the purchase of annuities) steady retirement income equal to-or, if they elected-greater than what Social Security could provide. They also would have money left over to pass on to their heirs.

In another case study, the report found that if Social Security contained a personal account component, a typical two-income New Jersey couple born in 1963 would be able to enjoy greater retirement income than today's Social Security can afford to pay and be able to leave their three children an inheritance of $38,335 each.

While Social Security is a poor investment for most New Jerseyans, the report noted, some make out even worse than others. For example, a typical single black man, born in 1970, likely will never get back from the system as much as he paid in. Heritage calculated his expected annual rate of return at negative 1.30 percent.

By way of contrast, the study found, even a low-income black male could amass a considerable sum in a personal account. A single, black low-income male born in 1970, for example, would accumulate a $35,000 nest egg by age 54. Even if he were to die before reaching retirement age, he would be able to pass this money on to loved ones.

"Look at it as seed money for New Jersey's low-income community," Beach said. "Even modest nest eggs, when passed on, can help the next generation get a good education, buy a home or start a business, putting them on the path to far greater financial success." Under the current Social Security system, he noted, workers don't "own" any of their tax payments; money paid into the system stays in the system upon a worker's death.

The Heritage study found Social Security's rates of return vary from congressional district to congressional district, reflecting differences in demographics and earnings. For a white, two-income couple born in 1970, the return rate ranged from a high of 0.90 percent in New Jersey's 13^th District to a low of 0.48 percent in the 12^th District. For a single black male born in 1970, the rate of return was negative in all districts, ranging from -1.49 in the 12^th to -1.04 in the 2^nd.

The full report, " Personal Accounts Would Make Social Security a Better Deal for New Jersey Families" is available online at heritage.org.