Debate: Should Congress Adopt Private Retirement Accounts Within Social Security?
Leanne Abdnor, member of the President's Commission to Strengthen Social Security
Roger Hickey, Co-Director, Campaign for America’s Future

With predictions that Social Security will have insufficient funds to pay full benefits as early as 2016, Social Security reform has been a hot political topic in Washington for several years. In 2001 the debate was the focus of the President’s Commission to Strengthen Social Security. Today, an advocate and an opponent debated one recommendation for reforming Social Security: the creation of private retirement accounts.

Leanne Abdnor, a member of the President's Commission to Strengthen Social Security, believes that private retirement accounts are a good idea. Because of the program’s predicted shortfall, Abdnor believes that Congress will have to raise income taxes (from all workers, including those not in the Social Security system), and cut benefits.

In response, Abdnor recommends three actions. First, she would index future benefits to inflation, rather than wages. Second, she would raise the minimum benefits for lower-income workers and widows. Third, she would create voluntary personal retirement accounts.

She supports creation of personal retirement accounts, she says, primarily because workers would receive a combined benefit greater than the current system can pay—if the system remains solvent, which some predict will not occur without Social Security reform. Abdnor recommends these funds only be invested like those in the federal Thrift Savings Plan (in large funds, rather than individual stocks).

Roger Hickey, however, believes private retirement accounts are a bad idea. Hickey noted that most Americans do not have the defined benefit programs that most members of NCPERS administer. As a result, these individuals are investors in the stock market out of necessity rather than choice, because their retirement funds are usually paid from a 401(k) program.

Because of the unpredictability of the stock market, Hickey says that benefit cuts under a system with personal accounts are inevitable. He proposes having Congress first address the issue of privatization, then focus on alternatives for improving Social Security’s finances. He supports changes such as lifting the cap on contributions by high-income workers and putting a portion of Social Security funds into an index fund.