Saving Social Security

How can we save Social Security for everyone’s benefit in this country? They know the answer in Great Britain. They know the answer in Australia. And in Mexico. And in many countries in Latin America, starting with Chile more than 20 years ago. As the respected Heritage Foundation notes, some 39 countries have adopted pension reform that includes personal retirement accounts (PRAs). Even Russia is considering some form of PRAs for its workers.

Yet, we in this country diddle around, with many people unwilling to face our serious problem. Today is the 69th anniversary of Franklin Roosevelt’s signing of the original Social Security Act. By 2037, Social Security will be completely broke. The solution of liberal Democrats, who vehemently oppose PRAs, is higher taxes and lower benefits.

As Jack Kemp said recently: “Mr. Kerry has avoided addressing Social Security. He is under enormous pressure from the left wing of the party to sign onto the ill-conceived idea of abolishing the payroll tax and converting Social Security and Medicare into monumental welfare programs.”

So let’s take a look at what has happened in Great Britain. In the ’80s, Great Britain let people opt out of their state system. Its success at reforming its government pension system has gone practically unnoticed in America even though the British experience contains many lessons for U.S. politicians.

Here’s how the British system works. In addition to a basic government-run pension, there is a second layer of benefits where British workers have a choice: They can take those benefits from the government, or they can take a tax cut equal to 4.6 percent of their annual earnings — almost one-third of the basic payroll tax — and invest it in a private pension.

The private options include either a company pension plan or a personal pension plan similar to individual retirement accounts available in the United States.

The result: Most British workers no longer have to worry whether they’ll have enough money to retire. Private British pensions have grown to more than $1 trillion — which approaches the size of the entire British economy and exceeds the pension funds of all other European nations combined.

British lawmakers handled the politics of Social Security reform smartly, taking early steps to ensure the changes would be good for everyone. By law, the investment companies that manage private pensions must provide workers retirement incomes at least as large as they would have received under the government system. In practice, private pension plans deliver incomes more than 2 times higher. Another plus: British lawmakers made “opting out” voluntary — any worker who wants to remain in the government system can do so.

As so many nations around the world have shown, the answer to our growing Social Security problem is to transform the system into a real prefunded personal investment system — just like all Federal Employees and members of Congress have.

At 60 Plus, we believe everyone should have the opportunity to accumulate wealth in his own account and be free to leave a legacy for his family. A personal retirement account (PRA) would provide this opportunity and help close the wealth gap in a single generation. Thirty-nine countries around the world have so far reformed their systems and given their citizens a choice, thus providing more secure retirements for all. We believe Americans deserve nothing less, especially for our grandchildren.

With lower birthrates dictating fewer workers paying in and with lifespans well past 65, clearly the wave of the future are the reforms instituted by more than three dozen countries.

It’s time the United States moved briskly into the 21st century on saving Social Security for future generations.

Jim Martin is president of the 60 Plus Association, a national non-partisan senior citizen organization based in Arlington, Va. Hugh C. Newton, a veteran Washington communications consultant, is an adviser to 60 Plus. Their email addresses are and