Social Security Needs Overhaul, Senators Say Proposals Include Later Retirement, Allowing Self-Investment

Moving to shore up Social Security before the retirement system goes broke in 2030, two senators proposed raising the retirement age, curbing cost-ofliving increases and allowing workers to invest some of their own payroll taxes.

Acknowledging that it is politically hazardous to “even breathe a word about reforming Social Security,” Sens. Bob Kerrey, D-Neb., and Alan Simpson, R-Wyo., warned Thursday that insolvency would force severe benefit cuts for retired people or a massive payroll tax increase on workers.

Unless changes are made in Social Security, which collects taxes from 142 million workers and pays benefits to an additional 43 million Americans, the system will begin spending more than it takes in by 2013.

By 2030, according to the most recent estimates from Social Security’s trustees, the system will be insolvent.

“As a nation, we are consciously damning our children to a very grim future if we simply continue to hide our heads in the sand and pretend that this massive problem doesn’t exist,” said Simpson. “Our goal is to save this program, not savage it, as some will have you believe.”

The American Association of Retired Persons, the country’s largest seniors group, criticized the Simpson-Kerrey plan, saying it would cut benefits and go beyond what is necessary to restore solvency. For the three out of five retired Americans whose only pension is Social Security, that could mean trouble, said David Certner, an AARP lobbyist.

“This is focused more on cutting benefits instead of strengthening the Social Security system,” Certner said.

But Richard Thau, executive director of Third Millennium, an advocacy organization that represents the interests of Americans in their 20s and 30s, said the legislation would restore confidence in entitlement programs and prepare them for the demographic demands of the 21st century.

“Last year, we discovered more young people believe UFOs exist than believe Social Security will exist by the time they retire,” Thau said, referring to a poll conducted for the group. “Now we hope our peers will believe in something else: KerreySimpson is a politically feasible plan to bring our future back to Earth.”

Republican leaders, as well as the White House, have said Social Security is off the table this year as they look for ways to balance the federal budget.

Kerrey said the reforms proposed Thursday would help avert a “fiscal catastrophe and revolutionize our economy and the way we plan for retirement by placing a new, and overdue, emphasis on national savings.”

Under his plan, working Americans would be allowed to divert 2 percentage points of their Social Security payroll tax to individual retirement accounts that they control. The money could be taken out once a worker turns 59.