The Social Security solution Essay Example for Free

The Social Security solution Essay The plan does not affect current retirees and those nearing retirement benefits for those now 55 or older would be untouched. Neither would it increase the retirement age above current law, increase payroll taxes or reduce annual cost-of-living adjustments (COLAs), now or in the future. We save Social Security by making two fundamental changes to the system for those now under 55. First, this plan changes the way first-time benefits will be calculated. These benefits now rise with overall wage growth. Under my plan, growth in initial benefits would be linked to the consumer price index. Initial benefits would still rise over time, only at a slower rate. Instead of rising 20 times over the next 75 years, they will increase by a factor of 10. Switching from wage indexing to price indexing will eliminate the unfunded liability of the Social Security system and allow us to avoid increasing the payroll tax for young workers. At the same time, future workers could count on receiving their benefits. Second, workers currently contribute 6. 2% of their wages to Social Security. My proposal allows workers under 55 the option of establishing their own personal savings accounts. Contributions into these accounts would range from 3. 5% of wages for low income workers to 1% for those at high income levels. Workers who choose to contribute to these accounts would have a variety of investment options and could withdraw proceeds upon retirement. But as they will be paying less into Social Security, their Social Security benefit will be slightly reduced. The basic Social Security benefit will be reduced by 25 cents on the dollar for each dollar they receive from their personal savings account. Nonetheless, the private investment account option should offer most recipients the opportunity for greater returns than Social Security alone could generate. Yes, we are asking some in the baby boom generation to insure the solvency of Social Security by making a sacrifice in terms of accepting a slightly lower initial benefit. An average 45-year-old male, for example, would receive about 1. 7% less under my plan, but look what happens in return. First, he is assured of receiving benefits because the solvency of Social Security is assured. More important, his children will receive far more in benefits. Under my plan a 25-year-old male who takes advantage of the personal savings account option should receive 19% more in benefits than promised under the existing system, based on historical averages for conservative investments. Todays retirees and those nearing retirement will receive their benefits just as they expected. Younger workers can not only count on receiving benefits, they will not have to worry about the prospect of working longer hours and paying increased payroll taxes that would otherwise be needed to keep the current system afloat. If they take advantage of the personal savings account option, theyll have more control over their own retirement resources and the opportunity for greater overall benefits than under our current Social Security system-even if it could pay all their promised benefits. Finally, and most important, my plan is honest and realistic. The problems facing Social Security have built up for so long and become so mammoth that everyone must realize they cannot just be wished away. This plan makes clear the costs and benefits, and it avoids false promises. If we are truly concerned about saving Social Security, there is no better plan than this one and no better time to start than today. If we face the challenge now, we can provide for our retirement security without sacrificing our childrens and grandchildrens standard of living. References Achenbaum, W. A. (1986). Social Security: Visions and Revisions. New York: Cambridge University Press Adams, P. (1990). Children as contributions in kind: Social security and family policy. Social Work, 35: 492-498. Buell, J. (1999). Avoiding generational war. Humanist, 59: 32-34. Hudson, R. (1999). The role of government in a society for all ages. Social Work, 24: 155-161. Kingston, E. R. and Schulz, J. H. (1997). (Eds. ) Social Security in the 21st Century. New York: Oxford University Press.