Personal accounts can help Social Security

Last week Federal Reserve Chairman Alan Greenspan urged Congress to deal with our country’s escalating budget deficit by cutting benefits for future Social Security retirees rather than raising taxes. There is no doubt that long-term problems facing Social Security are serious and need to be addressed now, but reducing benefits is not the best answer, nor is it fair.

In just four years, the first of the baby boomers will be eligible for Social Security benefits. Soon after, the financial demands put on Social Security begin to overtake the program’s ability to pay promised benefits.

When the system began in the 1930s, there were about 42 workers contributing for each retiree in the system. Now there are just 3.2 workers for each retiree. Similarly, the payroll tax on each working American is $1 out of every eight today. If changes aren’t made to update the system, eventually we’ll all pay $1 out of every five, according to the Social Security Administration.

We cannot afford to continue to let Washington politicians stick their heads in the sand. Rather than cutting benefits or raising payroll taxes, I believe there’s a better way to ensure that today’s working South Carolinians have a secure retirement.

Optional personal retirement accounts as part of the current system are an answer. By adding voluntary personal retirement accounts, we would strengthen Social Security and keep it solvent for future retirees while there’s still time.

These accounts would allow partial personal savings in safe accounts geared for long-term growth. Acting now to update Social Security would ensure benefits for those currently and nearly retired, because such accounts would not affect them.

Personal retirement accounts represent:

• Fairness. Today’s outdated system penalizes those with shorter-than-average life spans, and especially those who begin working earlier in life. Americans who die before collecting on their retirement benefits lose everything they pay into the system. Their spouses and dependent children may be eligible for benefits, but if they have no spouse or their children are older than 18, a lifetime of Social Security contributions is lost.

• Economic growth. Some politicians claim the best way to solve the coming crisis is to “grow the economy,” though government economists say that would be of little help and it has not worked in the past. Personal retirement accounts, on the other hand, would add to our economic growth because as workers invested, personal savings would increase.

• Real ownership. Since the federal government does not — and cannot legally — save our Social Security taxes in an account, this retirement account would let us own a portion of our contributions. Personal accounts would allow personal savings that can be passed on to our spouses, children or grandchildren.

Enacting voluntary personal retirement accounts is not the same as privatizing Social Security. The financial safety net provided by the current program will remain unchanged. Also, such accounts would not affect the disability portion of the system.

Personal retirement accounts as part of national social security systems are an option in nearly two dozen countries. Now it’s time we have that option here.

As citizens and voters, we must ensure that the president, members of Congress and candidates for those offices talk about the urgent need to update the Social Security retirement program. It’s their responsibility to tell us the truth, discuss realistic ways to keep the promises made by the current system and offer choices for tomorrow’s retirees.

Personal retirement accounts won’t solve all of our financial concerns. But retirement security that includes real ownership for everyone, not just the wealthy, is workable and should be enjoyed by every American.

Mr. Theodore was S.C. lieutenant governor from 1986 to 1995; he is volunteer state co-chairman of For Our Grandchildren, a Social Security advocacy group.