Social Security Reform Ideas

June 17th, 2010  |  Published in Social Security  |  5 Comments

When it comes to the Social Security system, the only absolute facts are that changes must be made to keep it solvent. With the arrival of retirement age for the baby boom generation, the system will have two workers for every retiree by 2030; currently there are 3.2 workers per retiree paying into the system. With the well running dry, there are many ideas about how to fix the problem, and everyone has a strong opinion. There are three basic schools of thought, though with many variations as to how to accomplish each goal.

Raising Taxes

A highly unpopular option with cash-strapped Americans, raising taxes would fill the coffers. Discussions about raising taxes usually center on which taxes can be raised, and for which segment of the population. Raising payroll taxes is the worst case scenario, and instead deliberations have centered on eliminating loopholes in the tax code for wealthy Americans, and the possibility of reinstating estate taxes while earmarking the money for Social Security.
There is an additional element to these negotiations. Though hotly debated around the country, some point out that legalizing immigration could give the government the needed taxes to ‘right the ship’, and that we have plenty of workers to pay into the system if all of the undocumented workers are counted.

Reduce Spending

Other models have been suggested with reduced spending of the Social Security money. An absolute distinction between retirement money and other government money is essential, since surpluses from the system have often been usurped for other government needs.
Ways to reduce spending are certainly not fashionable either, because they usually are centered on lowering already low benefits or raising the age at which benefits can be collected.


The third option is to privatize part or all of the system and allow each person to direct investments in stocks, bonds, and mutual funds for increased return on investment of their funds. This would enable future retirees to control the structure of their income and build a nest egg that they could use as they see fit.
Careful planning would be required to implement privatization, as there are a number of problems to consider. A few major considerations are current retirees or those near retirement age, and widows or children who depend on survivor’s benefits to live.