5 Reforms to Fix Social Security

Nothing evokes more fear from our nation’s leadership as the words Social Security Reform and the Obama administration is no exception. President Obama promises never to touch Social Security, even in the face of our current economic quandary. In reality, this Presidential promise indicates this administration is going to stand on the sidelines and do nothing as our nation’s deficit and debt spin dangerously out of control. The time for serious and responsible reform has arrived and action must be taken soon to ensure this promise to the American people is keep for the next generation. Presented here is a five point plan on how to increase the sustainability of the program and protect the financial security of people in retirement.

Increasing Retirement Age: Any Social Security reform should contain a reassessment of the early retirement and full retirement ages. Starting in 2015, the early retirement age of 62 should incrementally increase by four months per year until it has reached the age of 65. The same incremental increase should apply to the full retirement age until it has risen from 65 to 70 years old. After reaching these milestones, the ages would then be pinned to the average life expectancy for the United States. The retirement ages would be automatically adjusted every ten years based on new data on the life expectancy of United States citizens. The Social Security program needs to recognize the inability of the program to afford benefits for longer and longer periods of time.

Means Testing: Change the benefit formula to gradually reduce the benefit amount for individuals who are financially secure. Individuals with upper level income (top 15 % of retires based on income) will receive smaller benefits of anywhere from 50 to 80 percent of the previous formula. Individuals of lower or middle income levels will receive the same benefit formula as before. Very high income individuals (top 3% of retires based on income) who have private annual income providing them solid financial security in retirement would not be eligible for Social Security benefits barring some economic tragedy. Under this change, scarce Social Security resources would be concentrated on those who need them most. These mean testing changes would start in 2015.

Personalized Accounts: Every American would have the option of having a small portion (5%) of their Social Security deduction go into a personalized private account. Each account would provide the owner with several diversified investment options. This program is an opt-in program and individuals may stay with the regular program if they chose. Each individual account may not be touched by the federal government and individuals may pass down capital to family members or whoever they chose after they have passed away. Individual accounts would allow lower and middle class workers an opportunity to accumulate real wealth with the ability to pass it on to the next generation. This would ultimately lead to greater equality of wealth.

Broaden the Base: Under the current system, some federal, state and local public employees can choose to be exempt from the Social Security, neither contributing nor taking from the system. However, the private sector is required to contribute to their individual private sector accounts, pay Social Security and help support public sector retirement accounts. To balance this inequity and to provide a broader base for the Social Security system, these exempt employees will be required to contribute a small fraction of their income to the Social Security fund. These employees will still have the option of being included in the program and paying full contributions like the private sector.

Survivor Benefits: Retirement, disability and survivor protections should be cut by 33 percent for young people entering the work force today. This is a more balanced approach that will still financially protect survivors without encouraging disincentives. Survivor benefits need to be modernized to target those with the greatest need and to update a system that is out of step with today’s modern family. Currently, spouse and survivor benefits are based on marital status histories and lifetime earnings instead of focusing on need. It is an unconscionable transfer of resources from the poor and middle class to the small percentage of people who are well off. We need to cap individuals already on secure financial grounds and help those with actual need.

These ideas proposed are by no means the only reform proposals floating in the public arena. There are several other encouraging proposals that could also make a significant improvement on the Social Security System. However, these five proposals could be a extraordinary move in the right direction and help ensure Social Security solvency for those who truly need it. As President John Kennedy once said, “The Social Security program plays an important part in providing for families, children, and older persons in times of stress. But it cannot remain static. Changes in our population, in our working habits, and in our standard of living require constant revision.”


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