Benefits of Personal Accounts: Greater Benefits, Ownership, and Choice

December 18, 2003

"It is encouraging that President Bush plans to make Social Security reform a campaign issue," according to an op-ed in the Florida Times-Union. The author explains that long-term private investment can provide larger future benefits than can the current system. Further, personal accounts allow for choices and inheritability—aspects that are not available under the current structure. "Social Security: A Step Forward," follows:

"Bush's plan is to allow younger workers to divert a small portion of their Social Security taxes into a personally managed investment account that might include stock funds, bonds or certificates of deposit. That would put downward pressure on the need for tax revenues, as well as enhancing the monthly income of most retirees.

"Critics will argue that many people would suffer great losses in the stock market and end up in worse financial condition under the president's plan. That is a myth. The new system probably wouldn't offer individual stocks—only a few, carefully selected, low-risk funds and some no-risk savings instruments. There also would be an option not to create a personal account at all but rather to put everything into the traditional system.

"[According to Heritage Foundation]: 'Since 1802, stocks have earned an average of 7 percent annually, after adjusting for inflation. This average includes figures during the Great Depression and all recessions throughout the past 200 years. Even after recent losses in the market, a personal retirement account invested in stocks throughout the past 40 years would pay almost three times more in retirement benefits than today's Social Security does.'

"Inheritances also are an issue. Under the current system, the checks simply stop when a person dies. Under Bush's plan, money remaining in the retirement account would become part of a person's estate. It would be passed down to designated heirs— perhaps to be used to get an education, start a business or buy a home.

"It takes a great deal of political courage, as well as long-term vision, to propose the accounts because opponents almost certainly will demagogue the issue. Fortunately, this president has plenty of backbone—and if reform does become a major campaign issue, he may be able to claim a voter mandate to carry it out during a second term.

"To put the issue in words that Bush's critics generally can understand, this is a matter of choice. If some people choose not to use a method almost certain to enhance their lifestyles in old age, that is their right. But shouldn't the right to choose also be extended to their neighbors?"

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