Brett Arends's ROI: An absolutely genius proposal to fix Social Security

There are plenty of issues that could bring people together across the spectrum. And if you don’t believe me, look no further than an excellent survey conducted last month by The Harris Poll, on behalf of retirement firm PlanGap.

The subject: Congress and Social Security—the retirement plan that most of America is going to rely on, but which is heading for insolvency in about 15 years.

Some 74% told pollsters they think Congress won’t do anything to save Social Security until the crisis becomes so acute they have to.

Even better: 73% think members of Congress should have their own retirement plans suspended until they fix ours.

Now there’s a policy idea we could all get behind.

President-elect Joe Biden ran on a platform of expanding Social Security and improving its financial position. But his proposals may only cut the plan’s funding deficit by about a quarter. And he will have to get them through the House of Representatives and the Senate first anyway.

Hmmm.

Suspending retirement benefits for the members of Congress until they rescued our retirement plan… might help focus their minds, don’t you think?

I’ll bet the poll numbers for that idea would go even higher, too, if people knew what a sweet retirement deal members of Congress were getting.

These solons get, first, a generous, traditional final salary pension plan. Then they get the equivalent of a 401(k), called a “Thrift Plan,” with an employer’s match. Oh, and they get Social Security as well. A three-fer.

“It’s incredibly generous,” says Monica Dwyer, a financial adviser and Certified Financial Planner at Harvest Financial Advisors in West Chester, Ohio. Few enough people today even have a traditional pension plan, she says. Who else gets that, plus a defined-contribution plan, plus Social Security on top?

Public sector workers such as teachers, she adds, typically get a state pension instead of Social Security. They don’t get both.

The final salary pension plan is gold-plated. Someone who served in Congress for just 20 years would get about $59,000 a year, for life, as a pension, says the Congressional Research Service. That’s on top of the Social Security and the Thrift Plan.

Oh, and they don’t have to work until they’re 67 or 70 to get their full pension either. They can walk with the full deal as young as 60.

Meanwhile Social Security lurches toward insolvency.

The trust funds are expected to run out of money by around 2035. Without a rescue deal, benefits will be cut by about 20% or so, maybe more. According to the Congressional Budget Office, the trust funds’ balance is due to collapse over this decade from $2.9 trillion to just $533 billion.

Social Security isn’t even that complicated to run. It’s money in, and money out. Yet for the past 10 years it’s been paying out more than it’s been taking in. And apparently—who knew?—that doesn’t work long-term. By 2035 we’re going to have to find an extra $500 billion or so a year to keep it afloat.

Monica Dwyer suspects that “Social Security will not fixed until Congress is on the same plan as the people.”

But hey, maybe the Federal Reserve can just print the money. The national debt, $17 trillion last year, is already forecast to reach double that by 2030. What’s a few more trillion between friends?

Otherwise, we’ve got this really clever idea to get Congress to focus on the problem.