Many economists agree that if we do not fix Social Security by 2017 which is just 9 years away, that Social Security will pay out more than what it takes in.
This difference will have to be made up by dipping into other government spending, raising taxes, or cutting benefits. Over the next 75 years, Social Security faces a $27 trillion shortfall. It's safe to say most people would agree we cannot sustain this program without reforming it.
But there is a better reason to reform it other than the fact it will eventually go bankrupt in it's current state.
The better reason to reform it, is because it is not a good retirement plan. The Government is betting most of us will die before we collect any of what we paid into it. Allowing what we paid into it to go to the government, instead of our survivors.
The Government is sure to put together another bi-partisan commision to come up with a solution to save Social Security, that will only come up with the same solutions past commissions have. Raise the amount of withholding from your paycheck, and raise the retirement age.
So Not only are they going to raise your Social Security Taxes, they are gonna try and make sure you don't live long enough to collect it, by raising the retirement age. Not exactly what I would call a solution, and only amounts to putting a band-aid on a heart attack.
So under our proposal we would let individuals have more control over their retirement by offsetting their tax bill, by allowing for up to 10% of their earnings to be rolled into a 401k or IRA, tax free. At Age 55 they could choose to retire with full benefits of their retirement account without any penalties or taxes.
This money would be under their control ran by a investment firm (mutual fund) in which they have control over it. They wouldn't be allowed to do any early withdrawels from it, the exception being in cases of a terminal medical condition in which they could apply for early retirement in order to use their funds to survive upon, untill their death. At which time any remaining amount would go to their surviving children or spouse. They could however borrow from it in severe cases of economic hardships.
This amounts to passing wealth onto the next generation in a 401k under their names, instead of passing it onto the Government, which will just waste it.
By passing wealth onto the next generation we are giving them a head start at acheiving fiscal independence.
This allows the individual more freedom, by letting them choose where to invest their money, plus it creates economic growth, by removing the tax from busineses. Small Busineses would flourish as well as Large Corporations, which would create jobs, and more profitability for businesses. More profits mean higher returns to your retirement account.
So under this plan it's a win win for all.