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Policy Brief: The President's Social Security Proposal
August 08th 12:48:26 PM
The title “President's Commission to Strengthen Social Security of 2002 (Plan B)” doesn't exactly roll off the tongue, but the plan itself is quite straightforward. It is based on voluntary Personal Accounts. Workers could put a maximum of $1000 annually into these accounts, which would then be invested in a range of bonds and balanced funds. At retirement, the newly retired individual would be paid an annuity out of their Personal Account, and receive Social Security benefits. The Personal Account money would be constant, and the additional Social Security benefits would be determined by how much an individual had put into Personal Accounts while they were working.
The increase in Social Security's benefits would also be linked to price increases rather than wage increases, which would help the program stay in the black while also keeping pace with inflation. It would also increase the benefits for widow(er)s,
Since the Personal Retirement Accounts are voluntary, about 33% of the workforce is expected to opt out of the new system. With 67% of the workforce participating in it, Social Security would become self sustaining in 2059.
This plan has come under heavy criticism for threatening the entire system of Social Security for a fictitious crisis. At the same time, proponents of the plan have stated that the plan would lead to increased gains for individuals, and criticized detractors for not giving an alternative proposal. Supporters of the President's proposal also point to decrease in the risk that politicians would alter the benefits in the program.
Posted by Chris Rogers
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