1) The benefits of current retirees and those close to retirement must not be reduced. Washington has a moral contract with those who currently receive Social Security retirement benefits, as well as with those who are so close to retirement that they have no other options for building a retirement nest egg. Unfortunately for seniors, the U.S. Supreme Court has ruled that they have no legal right to their benefits. Thus, any real reform plan must guarantee in law that both retirees and those who are close to retirement will receive every cent that the government has promised them, including an accurate annual cost-of-living increase.
2) The rate of return on a worker's Social Security taxes must be improved. Today's workers receive very poor returns on their Social Security payroll taxes. For example, an average two-earner couple in their early 30s will receive about 1.2 percent on their retirement taxes from Social Security ... Meaningful reform must therefore provide a better retirement income to future retirees without increasing Social Security taxes. The best way to do this is to allow workers to divert a portion of their existing Social Security taxes into a personal retirement account that can earn significantly more than Social Security can pay.
3) Americans must be able to use Social Security to build a nest egg for the future ... Workers should be able to use Social Security to build a cash nest egg that can be used to increase their retirement income or to build a better economic future for their families…. If a worker died before retirement, his or her personal retirement account would become part of the estate, providing a nest egg that heirs could use for income, education, opening a small business, or donations to a church or charity.
4) Personal retirement accounts must guarantee an adequate minimum income. Seniors must be able to count on a reasonable and predictable level of monthly income, regardless of what happens in the investment markets. Therefore, in reforming the system, Congress should ensure that every American who chooses to have a personal retirement account receives a retirement income that is at least equal to what he or she would receive from traditional Social Security. A retiree whose personal retirement account contains enough money to exceed the guaranteed benefit should be allowed to use the extra amount to increase his or her monthly income, take the excess in cash, or leave the money to his or her heirs.
5) Workers should be allowed to fund their Social Security personal retirement accounts by allocating some of their existing payroll tax dollars to them. Workers should not be required to pay twice for their benefits—once through existing payroll taxes and again through additional income taxes used to fund a personal retirement account.
6) For currently employed workers, participation in the new accounts must be voluntary. No one should be forced into a system of personal retirement accounts. Instead, currently employed workers must be allowed to choose between today's Social Security and one that offers personal retirement accounts. Americans who choose to divert part of their payroll tax into a personal retirement account should give up part of their traditional Social Security benefits in return for the higher earnings of a personal account.
