Three Ways to Save Social Security

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WASHINGTON: About the only thing that 13-member Social Security Advisory Council agreed on Monday in releasing its recommendations for shoring up the trust fund was that stock market is the answer. How best to do this was another matter; three competing solutions were proposed, ranging from having government money managers move some 40 percent of the trust fund into the stock market, to allowing workers to invest some money for themselves. Although all three plans would seek to build up the trust fund by investing it differently, the differences in the approaches were considerable. The first, called the "maintain benefits" plan, would keep current benefits unchanged, would only slightly increase Social Security taxes and would investment about 40 percent of Social Security's funds in the stock market instead of putting all of it in Treasury bonds as is done now. A second plan, which would increase Social Security payroll taxes by 1.6 percent, would require workers to contribute to individual savings accounts, managed by the government, whose earnings would supplement their benefit checks. Benefits would slowly shrink, off-setting earnings from the savings accounts. The final option, considered the most radical, would allow workers to invest five percent of their Social Security payments in the markets of their choice. The biggest concern among analysts is that many individuals do not have the skills to invest for themselves, and that the federal government needs to ensure that the money is there when the individuals are ready to draw Social Security. And although capital-starved companies are salivating at the prospect of getting hold of at least some portion of the massive Social Security fund, which currently has a $60 billion surplus, some analysts feel investing in the stock market is too risky and that the lower yield of government Treasury bonds is more than offset by their greater stability. But all agree that something must be done, and soon: while the fund is currently operating at a surplus, the retirement of millions of Baby Boomers will exhaust it by the year 2029 if no changes are made. In releasing the final report, panel chair Edward Gramlich stressed that whatever solutions prove acceptable, something must be done: "We must begin to evaluate our options now to assure the American people that the program can continue to be financially solvent for future generations."