Promises to Keep: Saving Social Security's Dream

The Social Security system is edging toward insolvency: by the year 2014 there will be only 2.7 workers for each person receiving benefits, and by 2030 the system's annual cash deficit will be an estimated $700 billion. The authors' plan calls for phasing out the current system by introducing Personal Social Security Accounts (PSSA), which would allow employees to invest a portion of their Social Security taxes in stocks, bonds, certificates of deposit, mutual funds and other instruments--a savings account controlled by individual depositors and earmarked for retirement. No worker now paying into Social Security would be required to leave the system. They claim that the PSSA plan, which has been floated by others as well, would increase U.S. savings, reduce the payroll tax and raise retirement benefits. They cite long-term portfolio growth rates of 10% or more annually, and point to the success of a similar private, self-funded system in Chile. Whether the PSSA is politically viable is debatable, but this manifesto should nevertheless serve to further the national debate. Carter is chairman and CEO of State Street Bank and Trust Company, the largest custodian of pension funds in the U.S.; Shipman is a principal of State Street Global Advisors. 30,000 first printing; author tour. (Oct.)