Social Security as a universal entitlement program should be phased out over a 50 year period, at most. It should be replaced by a New Social Security program, administered at the state level, designed both to ensure that individuals are contributing sufficiently to satisfy the requirements for minimal savings toward their own retirement account and to ensure that retirees, whether or not they have saved enough, would receive at least enough income and/or services to live a basic life in which all of their most essential necessities are met.

Retirement Age

Retirement age should be defined as life expectancy at age 50 minus 10 years. As of 2008, life expectancy in the United States was 78.4 years (both sexes), which places the retirement age at 68.4 years, according to this proposal.

Individual Funding Expectation for 20 Years of Retirement

People should be required to plan to finance their retirement at a most basic level (to keep them at or above the poverty level) until they reach their life expectancy at age 50 plus 10 years. In other words, people should plan to support themselves for 20 years of retirement. People should be encouraged to increase their retirement funding to a point significantly higher than this minimum requirement so that they could live significantly above the poverty level during retirement. Of course, retirees could continue working to supplement their retirement.

Retirees Living Beyond 20 Years of Retirement

If retirees live past these 20 years, and if they do not have any assets left, the government would then fund the rest of their lives at an expense point equal to what their average for their last 10 years have been, increasing, when necessary to accommodate the increasing medical costs as aging continues.

Government-Monitored Savings Plan

Individuals should have wide-ranging freedom to choose the means by which they wish to invest and save for their retirement. Real estate assets as well as any other valuable assets could be included when valuing retirement portfolios. The government, however, being the ultimate guarantor of these funds to one degree or another, should retain the legal authority to periodically review these investments for adequacy and integrity, ensuring that people are not wildly speculating or unwisely risking their money on overly perilous investments. Every worker aged 25 and older would be required by law to subscribe to a valid retirement savings plan. People who fall way behind in their savings schedule or who fail to choose a valid savings plan on their own would subject themselves to a savings plan/schedule chosen by the government. In addition, if it is determined that they fell behind in their savings schedule without justifiable cause, a penalty of 10% of the underinvested amount would be levied with all proceeds going into their own retirement savings account. Savings enforcement can be done by requiring people to submit proof of savings updates to the government every year. Failure to do so will be met with fines and other effective enforcement measures.

Government-Capped Losses of Retirement Account Balances

If, upon the commencement of retirement, the government approved portfolio of an individual’s retirement account suffered a dramatic fall in value over the last 20 years before the retirement date due to falling investment values, the government will retroactively cap the losses of that portfolio to 3% annually for each of the previous 20 years, if necessary. In other words, the Social Security Administration will guarantee a future retiree with around $550,000 upon retirement if that retiree had a portfolio worth exactly $1,000,000 (in constant dollars) 20 years before their scheduled retirement. A retiree with a portfolio worth $1,000,000 10 years before their retirement would be guaranteed around $737,000 (in constant dollars) upon retirement. An account with $1,000,000 one year before retirement would be guaranteed $970,000 upon retirement. In summary, this 3% capped loss guarantee would only be triggered for portfolios whose value is below $1,000,000 at the time of retirement. Reckless investments taken without government approval during these last 20 working years would partially or fully invalidate this guarantee.

Once an individual has met the minimum investment requirements for retirement (namely, $1,000,000 in cash and/or other assets upon the commencement of retirement), that person would be freed from any government mandate to continue contributions to their retirement account. However, contributors should be reminded of the fairly low level of support guaranteed by the government and should be encouraged to continue investing for retirement. Individuals, who have met their minimum requirements, could invest additional funds in any way they see fit without government oversight. The government will not insure any additional funds, however.

Retirees With Insufficient Funds

Individuals who, at the time of retirement have less than the $1,000,000 minimum retirement funding level would still be guaranteed a maximum portfolio loss of 3% averaged over the last 20 years before retirement, but they would naturally have less money paid out during each of their retirement years. They would need to work out a plan with the government to plan for a 20-year retirement lifestyle consistent with such resources. Such retirees would always be guaranteed enough income and/or services to remain above the poverty level, but the government would have an increasing influence on the kinds of goods and services that can be used by such individuals. In other words, people who have not saved up enough for retirement would be, to various degrees, at the mercy of the government as to what they could buy and where they could live, among other restrictions.