Dick Armey's Social Security Fix: Let People Opt Out

Reader Comments
Back to blog

I should add I foresee the "income level" against which my contribution ranges would be established as income before deductions; to do otherwise would permit the wealthy to artificially lower their income, potentially to zero, so as to reduce their opt-out contribution requirement or exempt them from it entirely. With the possible exception of 401ks, no one who can afford to speculate in the stock market should be exempt from the requirement.
I am, by the way, a considerably liberal Democrat. Being a Democrat should not be equated with opposition to balancing the budget, of which this proposal addresses one aspect. My bent is to take care of the poor through the progressive distribution of wealth, including my own middle-class income. At the same time, the solution I propose does not deprive anyone of a social security benefit, but simply introduces another factor in the calculation of the final payout.

fjsteimann of MN 9:30AM November 20, 2010

Over the years, I have proposed to various politicians the following solution to the social security crisis. Mr.Armey was not one of them, but the proposals are similar.
My idea is to convert social security to a contributory system, designed to insure participants against the possibility they will not be able to save enough privately to fund their own retirements, while still providing for the poorest participants. My proposal encourages, but does not require, private investment and, in any event, keeps private investment outside of the social security system itself. Notably, it eliminates the necessity of continuing to raise the retirement age in order to keep the system financially sound.
In a nutshell, my proposal imposes an opt-out contribution requirement after age 50, on top of social security taxes, to maintain a participant’s full social security payout as presently projected. For every year in which the participant opts out of the system and fails to make the contribution, the participant’s projected payout will go down a sufficient percentage that, were the participant to make no contributions, the final payout at full retirement would be perhaps half of the full amount projected at age 50 (Congress may choose to adjust this percentage, depending upon fiscal needs; it could be lower or higher). Should the participant stop, and then resume, paying the contribution, the projected payout would be reduced by the same percentage for the years missed.
The contribution is entirely voluntary. The decision of whether to pay it will depend upon whether the participant believes the participant can make a greater rate of return, investing the contribution amount on the open market, than the guaranteed return the participant will receive by “investing” the contribution amount in the final social security payout.
The actual contribution amount, which I envision as a range, will also be progressive. For those participants who cannot afford to pay, the "required" contribution will be zero. Likewise for the remainder, the range of contribution amounts will be based upon income level. At each level, the question for Congress will be keeping that amount competitive with the market relative to projected returns, though at a slightly higher cost-to-benefit ratio on the social security side.
The anticipated result of this system is that those who have saved a sufficient amount for their own retirement will opt out of making the contribution in favor of privately investing the contribution amount elsewhere. This will drastically and dramatically reduce the draw against the social security fund, while at the same time social security taxes continue to be collected, restoring the integrity of the fund to a positive balance. Eventually, the proposed system may permit the reduction of social security taxes. Implementation would be on a prospective basis, so as not to affect those presently receiving benefits.

Fritz Steimann of MN 1:11PM November 16, 2010

Jim of MI has fallen for the trendy rightwing soundbite calling SS a "Ponzi scheme." As usual, the right is clever at dreaming up slogans, (death panels anyone??) but off in outer space with their analysis of the real world. Ponzi schemes are designed from the get go to make the schemer rich, and to give some early bird joiners a good return to lure in future suckers. No one is ripping off SS contributions. Past, current and future contributions are all being used to pay benefits to participants (less a very small admin cost, which is much lower than the fees and expenses charged by private management firms). Participants have gotten what they were promised for the past 80 years and will continue to get promised benefits for another 25-30 even with no changes. With some changes to account for substantially changed demographics SS should continue to deliver benefits indefinitely.

mel of MD 12:25PM October 26, 2010

Considering the 'long term implication' of Social Security Support,
it's a good deal! The point here is: 'long term'! None of us has the 'luxury' of knowing what will happen to our lives perosnally
(accidents), or who pulls the plug on any wealth we may have saved under whatever economic conditions are going on the country. There are 'many hungry devils' that will reach into your savings plans for your future: weather it's the market itself, the banks, or the 'expects' who really don't care about your savings as long as they get more than their share.! SOCIAL SECURITY: I'M FOR IT. And if you 'pull out of the program', I hope nobody, no system, or no expert is smarter than you in getting to your life savings before hope to grab the few cents that may be left. THAT!!! is REALITY !
YOU WILL DEPEND ON SOCIAL SECURITY whether your 'think' you 'know better', that you don't want to! It will be your last resort, and your last 'blessing'.

Louis Molnar of FL 9:48AM October 20, 2010

Bernie Madoff went to jail for his Ponzi scheme. Too bad we can't send the Democrats who came up with the SS Ponzi scheme and the Republicans and Democrats who "borrowed" from the so called "trust fund" to the same place.
The Founders knew what they were doing by trying to limit the power of the Federal government. Too bad we weren't smart enough to listen to them. Now we are in a death spiral of borrowing and spending.

Jim of MI 1:43PM October 02, 2010

Pres Obama has appointed a commission to cut the deficit by 3% bt 2012 They are looking only ar SS They want to raise the retirement age to 70, cut or stop the cola and have money invested with the bnks instead of the SS system . They are not looking at raising the cap on wealthy citizens to contribute more to the system . This will go before congress in Nov after elections ad will be in place with an up or down vote. Call you Senators and House Reps and tell them no cuts to SS or your children will be working the rest of their lives

Pat Gee of NY 9:31AM September 28, 2010

My grandfather died at 62, my father at 58, I'm 72 and was laid off at 62 after 42 years in the petro/ chemical industry with no pension. I did save enough to get by but only because of SS. However if I was starting over I'd op out of SS.
Bob

robert of FL 9:31AM September 28, 2010

LET PEOPLE OPT OUT WITH THE INSTRUCTIONS THAT, IF THEY FAIL TO PREPARE FOR THEIR RETIREMENT, THEY CANNOT TURN TO THE GOVERNMENT FOR FOOD STAMPS, HEALTH CARE OR ANY SORT OF WELFARE. THEY MUST MAKE DO WITH THEIR OWN FAMILY SUPPORT SYSTEM.
SORRY BUT, IF YOU ARE STARVING OR IN POOR HEALTH, DO NOT TURN TO THE GOVERNMENT OR THE TAXPAYERS FOR ASSISTANCE.
SOCIAL SECURITY IS TO PROVIDE A SAFETY NET. IF YOU CHOOSE TO OPT OUT, IT IS NOT THE TAXPAYER'S RESPONSIBILITY TO SUPPORT YOU.

DIANE LANE of FL 9:44AM September 27, 2010

Republicans suck the life out of US,make a ton of $$ for their daddy Warbucks buddies and leave office and country in shambles.Democrats had to spend more of your money to fix it. Result :taxpayer GETS IT coming and going. When will you people learn your elected politicians have gone in business for themselves? Next time,I'm voting GREEN party across the board- They say you waste your vote if your guy doesn"t stand a chance of winning. I say the bums will start to notice when CHANGE is afoot.Take your country back from these scumbag DC politicos whose agenda is for Big Brother/Big Oil/Big Banksters and not for YOU ,who pay for it ALL!!!!!

craig of CA 12:03AM September 27, 2010

all the generations that live on social security better wake up the republications want to do away with social security and line their pockets they do not care about the poor. we paid in to this program the whole time we were working. this is our own money. the republicans allowed the goverment to borrow our money and never paid it back. were we asked if they could borrow it the answer is no. if they can lend all of this stimulus why not give our money back from that. b fielding

BEVERLY FIELDING of TX 9:10AM September 26, 2010