Does reform maintain Social Securitys progressivity?
While individual equity (“moneysworth”) is important, so too is social adequacy. Social Security’s current benefit formula is designed so that benefits replace a higher share of wages for low-earning workers than for high-earning ones. Under any reform plan, total benefits, including benefits from personal accounts, should remain as progressive as they are today. Does reform protect participants against undue risk? Under the current system, workers face the risk that future Congresses will default on today’s unfunded pay-as-you-go benefit promises. While reducing this “political risk,” personal account reforms should be careful to minimize other kinds of risk, such as investment risk, inflation risk, and longevity risk–that is, the risk of outliving ones assets. If we reform Social Security today, the changes can be gradual and give everybody plenty of time to adjust and prepare. If we wait much longer, change will come anyway–but it is more likely to be sudden and arrive in the mids
