The Heritage Foundation
A tax-exempt public policy research institute
214 Massachusetts Avenue, N.E.
Washington, D.C. 20002-4999
(202) 546-4400
http://www.heritage.org
The Heritage Foundation Proposal for Reforming Social Security
The Social Security system faces two severe crises.
First, it faces a funding crisis: the system simply cannot pay
promised benefits to future retirees without major changes in the
program..
Second, although the system currently provides reasonably good
insurance benefits for the disabled and the dependents of deceased
workers, most workers face their own Social Security crisis because
the program typically is a very poor method of saving for retirement.
Indeed, the retirement income generated from Social Security
contributions generally is far below the amount these same
contributions would generate in the safest private investments or
even in Treasury bills. Worse still, the rate of return in Social
Security is falling. Moreover Social Security provides only a
monthly check, and not a cash nest egg. So the program does not
give retirees the security of a savings account, and it shortchanges
the heirs of workers and retirees who die relatively young.
Social Security needs to be reformed to deal with these twin crises.
The reform should do two things: secure the ability of the system
to deliver on its promises to beneficiaries, and enable today's
workers to look forward to more income and wealth in retirement.
To do this we propose the following reforms:
- Enact a Social Security contract between the government and
citizens, specifying the benefits that today's and future retirees
will receive (currently the Supreme Court says there is no right
to benefits).
- Concentrate immediately on securing the retirement years of
working Americans by raising the retirement income and savings they
can expect: make no changes in Social Security's disability and
dependents program.
- Raise retirement income, and add a true savings element to Social
Security, by allowing workers to place a portion of their payroll
taxes now devoted to retirement income (but not disability etc.)
into a personal savings/investment retirement account. No worker
would be required to open such an account. Workers who exercised
this choice would not receive the Social Security benefits associated
with the portion of their taxes they placed in a private account,
but they would receive the Social Security benefits financed by
the rest of their payroll taxes.
- Require all personal retirement accounts to include an annuity
at least equivalent to the traditional Social Security benefits
foregone by the worker. The annuity would have to be insured - with
back-up insurance provided by the federal government.
- All Americans who opened a personal retirement account with a
portion of their payroll taxes would be entitled to a minimum
benefit from the traditional Social Security system.
Officers
Edwin J. Feulner, Jr., President
Phillip N. Truluck, Executive Vice President
Herbert B. Berkowitz, Vice President
Stuart M. Butler, Vice President
Becky Norton Dunlop, Vice President
Michael G. Franc, Vice President
Lewis F. Gayner, Vice President
Kim R. Holmes, Vice President
Adam Meyerson, Vice President
John Von Kannon, Vice President 6 Treasurer
Bernard Lomas, Counselor
Robert E. Russell, Jr., Cotlnselor
Board of Trustees
David R. Brown, M.D., Chairman
Richard M. Scaife, Vice Chairman
J. Frederic Rench, Secretary
Douglas F. Allison
Holland H. Coors
Midge Decter
Edwin J. Feulner, Jr.
Jerry Hume
Hon. J. William Middendorf, II
Thomas L. Rhodes
Thomas A. Roe
Hon. Frank Shakespeare
Hon. William E. Simon
Hon. Jay Van Andel
Barb Van Andel-Gaby
Preston A. Wells
Honorary Trustees
Joseph Coors
Kathryn Davis, Ph.D.
Hon. Jack Eckerd
William H. G. FitzGerald
Hon. Henry H. Fowler
Nancy B. Krieble
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