A New Approach on Social Security Reform

"I believe the president should focus on putting Social Security on a sound footing. The best way to do that is to adjust benefits by increasing the retirement age, cutting back payments further for those who choose to retire early and indexing the growth in benefits to the consumer price index (that is, inflation) rather than to wages. Raising payroll taxes -- or increasing the ceiling below which those taxes are collected -- should be off the table. Such a hike would have a disastrous effect on the economy.

Should we give up on personal accounts?

Not at all. Those accounts will grow organically as Social Security withers.

The inevitable result of benefit adjustments will be to reduce, slowly over time, the importance of Social Security in the overall retirement scheme. The system would become more of a safety net. Retirees would, very naturally, fill in the gap by saving more.

The vehicle for those savings would be personal stock and bond accounts -- which already exist!

There are 401(k) plans, IRAs, Roth IRAs, Keoghs, 403(b) plans and other tax-advantaged accounts. These should be consolidated under simplified rules. My preference is a universal, unlimited IRA -- income that you put into savings is not taxed at all. When you withdraw the money, at, say, age 60 or later, then you pay capital-gains taxes on it."

Seems worth a look.