1) Current retirees get no cuts. No means testing. No changes at all. It is too late for them to adjust to compensate for it.

2) The same applies to anyone within a few years of retirement.

3) Set a threshold age. For everyone younger than that, 2 changes phase in gradually. They are a higher age to start receiving benefits and greater means testing to receive benefits. By gradually, I mean that the scale will adjust by age monthly. No sudden jumps just because your birthday was two days after a threshold rather than two days before it.

4) Set the goals such that they reduce costs over time.

5) Lower Social Security taxes and raise 401(k)/IRA contribution limits.

IMHO, I can invest and manage my money better then the gov’t.

Unfortunately, the gov’ts preconceived notion that they know better, will ultimately lead to the further clusterfcuk called Social Security.

Maybe the poor retirement savings rate of the majority of boomers is a blessing in disguise — they won’t be able to afford to retire and will have to work longer.

I feel badly for younger generations who will have to shell out more and more money to what is essentially a welfare scheme for the elderly.

One thing that AARP does is to try to scare its members into thinking any reform or change will rob them of their pensions. It is a real issue to them, since many rely solely on social security – but it is also bogus, since, as far as I know no proposal has been made to reduce their benfits, although their taxes have been increased.

Personally I think the government will solve the problem by “means testing” potential retirees, raising the retirement age and taxes on social security recipents and continually forcing new “contributions” from the young.

The only way really to solve this mess is through personal retirement accounts such as has been proposed by George Bush.

Compulsary ‘Superannuation’. Employers must pay 9% of salary into a retirement account. Government 150% match of $1500 if $1000 is put in (capped to $1500 yearly) for Low income earners.

I’m honestly not too sure how the transition went (I’m a little young) – but we did it. And i *think* it works.. I pretty sure it will work out for me – as I’m adding additional funds of my own.
It also means – that I can confidently expect to have $0 pension when i retire… so i Know I have to think about it and have to do something about it.

1) Raise Social Security taxes by 3 percent; all of that increase would go towards the new individual savings accounts (I’ll call it SA for this discussion). Current effective rate for SS remains at 12.4%. (The 3% is just off the top of my head. It could be higher if necessary. Somebody with a lot of data would be able to figure out exactly what the rate should be. In any case, this amount would still be a payroll tax, but it would go into an account, and the individual owner could administer it as they see fit, but not withdraw any monies until reaching benefit age.)

2) The age to receive benefits is raised to 70.

3) Retirement benefits are scaled back yearly based on date of birth. For example, people who are 30 or under now would receive no SS benefits when they retire, other than what’s in their new SA. People aged 30-40 would get 25% of their currently-project SS benefits; aged 40-50, 50%; 50-60, 75%; 60-70, 100%. You could get finer-grained with the years and percentages if you like, but this is just an outline.

4) Gradually, the percentage of retirement taxes going towards SS and SA would reverse; e.g., in 10 years, the SS percentage goes from 12.4% to 10%, while the SA percentage increases from 3% to 5.4%; in 20 years, SS is 7.5% while SA is 7.9%; 30 years, SS is 5.0% and SA is 10.4%; 40 years, SS is 2.5% and SA is 12.9%. Again, these percentages are all just off the top of my head, but it illustrates the point. Gradually the SS portion would diminish to 0 as SS recipients die off and people transition to receiving their SA for retirement.

Again, somebody with a lot of demographic data could run a very accurate simulation and figure out these percentages much more accurately. But the basic idea is very clear. Yes, taxes would have to be raised immediately. But at least all of that increase would only be forced savings; people would be “keeping” that money for their own retirement. This would alleviate a lot of the pain from the increase.

http://www.socsec.org/publications.asp?pubid=336

Clinton apparently proposed this, but like all things Social Security it went nowhere.

In principal, I’m not opposed to some form of private accounts, but the transfer to such a system would be painful, and frankly, I don’t think people should be able to invest all of this money anyway they like. Social Security should be understood as a pension of last resort, to make sure that the elderly are not destitute and relying on the government for sustinance. Letting people invest this pension of last resort in the stock market like they do now with their 401ks will produce higher on-average returns, but a sizable minority will blow their accounts or so seriously deplete them that they will end up on the street. The growing literature in behavior economics shows that people irrationaly discount the future to a shocking degree, a point that is demonstrated by low-participation rates in workplace 401ks. People should be able to invest the vast majority of their wealth any way they want, but as a society we should force them to keep a small amount in low-risk investments for when they can no longer work.

Although I like the idea, I don’t see how it can be done without some major pain. The problem with SS (other than the fact it shouldn’t exist as it does now) is that each retiree’s benefits are paid by current workers. If we divert current contributions to private accounts, it does nothing to solve the funding problem.