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Deals and People November 30, 2001
Soc. Sec. Commission: Shrink Benefits, Allow Stock Investments
November 30, 2001 (PLANSPONSOR.com) - President
Bush's Social Security Commission will propose shrinking
benefits for most future retirees, while allowing them to
invest part of their payroll taxes in the stock market in a
new personal investment account, according to an Associated
Press report.
Reported by Camilla Klein
One commission suggestion for reforming the system would be to tie the growth of benefits checks to inflation instead of wage growth starting in 2009. That would keep Social Security afloat without increasing government spending.
As part of that plan, workers would have the option of investing 4% of their wages in a personal account, with their benefits reduced by this amount plus 2% annual interest.
Another option is to adjust Social Security checks downward beginning in 2009 to take into account longer life expectancy. This proposal would require additional government spending, and incentives for postponing retirement would need to be added.
In this second proposal, workers would have to invest an additional 1% of their paychecks before being eligible to put 2.5% of their payroll taxes into personal accounts. Tax credits would help low-income workers to come up with the starter money.
The commission plans to report to Bush in December, but members acknowledge the issue is unlikely to move forward in Congress before the 2002 elections.