Social Security Plus

Abstract

With the decline of defined-benefit pensions, workers have few attractive options for obtaining a guaranteed benefit in retirement to supplement Social Security. This Article details a new solution to this problem: allow Americans to purchase supplemental Social Security benefits, which we call "Social Security Plus." We show how workers could use this new "public option" to roll their existing defined contribution accounts or other retirement savings into Social Security and thereby obtain a guaranteed, pre-determined supplement to their primary Social Security benefit. Social Security Plus would not only provide a lifetime annuity, but also create what is effectively a new investment vehicle, since workers would be able to deposit supplemental contributions at any time and receive back a guaranteed benefit based on their age and other characteristics. Thus, workers have the opportunity to stop worrying about investments that charge excessive fees or fail to keep up with inflation as well as about annuity companies that might go belly up. We discuss how this proposal could be designed and implemented, as well as lay out accompanying reforms that would maximize the chance that workers would use this new opportunity to put away additional retirement savings.