The Proposal

Saving Social Security from itself

The Problem

Social Security is on a collision course with failure.  By 2035, there won't be enough money going into the system to pay out the promised benefits to those workers who will have been paying into the system for 40+ years.

Without significant changes by Congress, one of two things is going to happen around 2035:

• Benefits paid out to retirees will be cut (loss of income to older people).
• Taxes paid into the system will be raised (loss of income to younger people).

To make matters worse, neither, nor both of these options combined, solves the systemic issue with Social Security. We need a plan to save Social Security from itself. 

Tensions

Social Media today is full of rants by Millennials and Gen-Z about 'the Boomers'.  Phrases like:

• The Boomers pulled the ladder up behind them!
• I can't afford a house, butthe Boomers home equity is skyrocketing!
• They (the Boomers) don't care about us!

Pitting one generation against another is no way to maintain a healthy society.  Fortunately, in regards to the Social Security system, there is a positive solution.

The Solution

We need to offer younger workers the option to direct their Social Security contributions into their own, personalized, retirement account. Imagine the following proposals:

• We pass a law enabling younger workers a one-way 'opt-out' of Social Security
• It's entirely optional for 20 years, after which, it becomes mandatory
• If you opt-out, you waive all claims to any future social security benefit
• In exchange, your 6.2% FICA withholdings are redirected to a private retirement account
• Your employer continues to pay 62% into the existing Social Security system
• This is needed to fund current (and potentially future) beneficiaries.
• In 20 years, all new workers must put 6.2% (or more) into a retirement account

The Transition

This proposal brings about a 'Transition Period' in which some employees remain in the Social Security system and others do not.  this Transition Period could be up to 80-100 years long.  What will happen during that time?

First, we recognize that a majority of young workers will choose the private option over the existing Social Security option. This will immediately reduce income to the program.  To compensate, we allow the Social Security administration to issue bonds to maintain promised benefits. 

Throughout the Transition, as more and more people die, there will be fewer and fewer beneficiaries to pay out.  Also through this Transition period, employers are continuing to put 6.2% of payroll taxes into the system; a revenue stream that is highly guaranteed.

This model of debt and income over time will allow Social Security to continue to operate and pay off any debt accumulated at some point in the future.  When the last beneficiary dies, Social Security will then spend all income paying back the loans they assumed.  When the loans are paid off, the Social Security administration can cease to exist.

The Benefits

• It offers younger workers a better deal than the current system
• It keeps the promise made to older workers
• It's a gradual replacement of social security with private retirement accounts
• It spreads the shock of massive change across decades