The plan, drafted by President Bush, centers on voluntary personal retirement accounts that would allow employees to divert up to 4 percent of their payroll taxes into a mix of bonds, securities and stocks. The investments would pass on to the person's children in the event of death.
Speaking at the Holiday Inn Express at an event co-sponsored by the Hilton Head First Monday Republican Lunch Group and the Greater Bluffton Republican Club, Wilson cited problems with the current Social Security system, such as longer life expectancies and the upcoming retirement of baby boomers, as reasons why changes are necessary.
"You do the math," he said. "It doesn't work. We need reform."
Wilson said personal retirement accounts offer employees both greater choice and higher returns.
Wilson was joined by Robert Emmet Moffit, deputy director of domestic policy at the Heritage Foundation.
"Some people don't think this is a serious problem," said Moffit, who worked in President Reagan's administration. "That's why we're having this conversation."
To keep the current system afloat would require young people to pay more and more in taxes while receiving lower rates of return, he said.
Another option for dealing with Social Security's impending insolvency would be to raise payroll taxes across the board, he said. Citing research by Boston University economist Lawrence Kotlikoff, Moffit said under this approach, payroll and income taxes combined would have to rise to about 40 percent by 2050 to pay for senior citizens' current benefits. According to Moffit, this solution would have a trickle-down effect on the country's economic well-being.
"The costs will be enormous," he said.
Moffit said he supports establishing personal retirement accounts because they offer employees greater choice, are insulated from government borrowing and can be passed to children after death.
He said that although the Bush proposal is a good plan, it is not without costs. He estimated the transition costs of converting the system to personalized retirement accounts at between $1 trillion and $2 trillion but said this one-time fee would reduce the government's long-term obligations.
"You're going to pay now or later," he said. "Bottom line is you're going to have to pay, but the overall cost will be lower using a system of personal retirement accounts."