A plug for Social Security Reform
President Bush's plan for
Social Security Reform is based on the current retirement plan for federal employees.
There already is a model for such a reform, the Thrift Savings Plan, or TSP, for federal employees. It allows them to contribute up to $12,000 into a personal account they own and control. Employees can chose from five different funds: government bonds, a fixed-income fund, a common stock fund, international investments and a small-cap stock-investment fund--or a mixture of them. Today, nearly 3.5 million federal employees participate, and the fund's value is more than $120 billion. No one has lost his shirt, and participants own real assets for their retirement.
One option for making a TSP-type system available to all American workers is a proposal advanced by Thomas Saving, a Social Security trustee and senior fellow with the National Center for Policy Analysis (of which I am chairman). Under the Saving plan (see http://www.ncpa.org/pub/st/st272/) a worker making $35,000 in 2005 would invest about $1,585 a year in his retirement account: 1.25% of wages ($437) out of his pocket, a like amount from his employer, and diverting 2.03% ($711) of the payroll tax that would otherwise go to the government.
Young people would instantly become owners of real assets, which would be, in President Bush's words, "a nest egg you can call your own and government can never take away." How big a nest egg? At $1,585 a year, a young medium-wage worker entering the workforce today would amass about $302,000 over his working life, enough to pay a benefit equal to what the current system promises. And for minority workers, who have shorter life spans and often don't live to receive Social Security benefits, the assets their survivors would receive would be a huge positive.
Federal Employees do not invest in Social Security, all of their retirement contributions go into TSP (or into the original Civil Service Retirement System - CSRS). And, similar to what is being proposed in Bush's reform plan for Social Security, when TSP was first started up, federal employees who were under the old CSRS plan were given the option of staying in the old plan or converting into TSP. New hires in the Federal Government are not allowed an option and are all automatically included in TSP. The people who stayed with CSRS can contribute into a TSP account which is separate from CSRS, but without matching funds from their employers, the Federal Government. It acts as a traditional IRA for those folks. Thus, those employees who were heavily invested in CSRS (had many years of service) usually opted out and those who were relatively new to federal service opted in.
A lot of federal employees were leery of the new TSP system, but contrary to what they thought would happen, that it would fail like most govennment ideas, it has turned out to be a well planned, well run, successful endevor.
Social Security Reform is based on the current retirement plan for federal employees.
There already is a model for such a reform, the Thrift Savings Plan, or TSP, for federal employees. It allows them to contribute up to $12,000 into a personal account they own and control. Employees can chose from five different funds: government bonds, a fixed-income fund, a common stock fund, international investments and a small-cap stock-investment fund--or a mixture of them. Today, nearly 3.5 million federal employees participate, and the fund's value is more than $120 billion. No one has lost his shirt, and participants own real assets for their retirement.
One option for making a TSP-type system available to all American workers is a proposal advanced by Thomas Saving, a Social Security trustee and senior fellow with the National Center for Policy Analysis (of which I am chairman). Under the Saving plan (see http://www.ncpa.org/pub/st/st272/) a worker making $35,000 in 2005 would invest about $1,585 a year in his retirement account: 1.25% of wages ($437) out of his pocket, a like amount from his employer, and diverting 2.03% ($711) of the payroll tax that would otherwise go to the government.
Young people would instantly become owners of real assets, which would be, in President Bush's words, "a nest egg you can call your own and government can never take away." How big a nest egg? At $1,585 a year, a young medium-wage worker entering the workforce today would amass about $302,000 over his working life, enough to pay a benefit equal to what the current system promises. And for minority workers, who have shorter life spans and often don't live to receive Social Security benefits, the assets their survivors would receive would be a huge positive.
Federal Employees do not invest in Social Security, all of their retirement contributions go into TSP (or into the original Civil Service Retirement System - CSRS). And, similar to what is being proposed in Bush's reform plan for Social Security, when TSP was first started up, federal employees who were under the old CSRS plan were given the option of staying in the old plan or converting into TSP. New hires in the Federal Government are not allowed an option and are all automatically included in TSP. The people who stayed with CSRS can contribute into a TSP account which is separate from CSRS, but without matching funds from their employers, the Federal Government. It acts as a traditional IRA for those folks. Thus, those employees who were heavily invested in CSRS (had many years of service) usually opted out and those who were relatively new to federal service opted in.
A lot of federal employees were leery of the new TSP system, but contrary to what they thought would happen, that it would fail like most govennment ideas, it has turned out to be a well planned, well run, successful endevor.
posted by Jamie at 1/31/2005 07:14:00 PM
<< Home