Pay now, not later
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I was looking at my wife's statement of benefits from Social Security Administration -- you know, those mailings that show the amount of Social Security tax you've paid over your lifetime and the amount SSA pays you when you retire? So if she stops working now and retires at age 62, SSA will pay out all she contributed within just 4 years. And where does the rest of the benefit come from after age 66? From other workers paying Social Security taxes for as long as she's alive, that's where.
And therein lies the problem for "defined benefit" plans -- not just Social Security and Medicare but also military and other government pension plans that define your retirement benefit as a portion of your working pay. Members of Congress like defined benefit plans because they can buy votes now and leave the bill for future Congresses and future generations.
Time for a change: Government-provided pensions need to move to "defined contribution". For instance, military pensions could evolve into something similar to today's 401(k) private sector plans where employers pay a defined amount into an account now, not later. I've already proposed that the tax code establish a single $25,000/year tax-deferred savings account; defined contribution pension plans could contribute to this savings account. And I also proposed that Social Security and Medicare morph into safety nets rather than pension plans.
Accountability necessitates that people need to be within reach to be held accountable. Defined contribution pensions hold Congress accountable -- now.
UPDATE 7/6/2011 -- From SSA: "In light of the current budget situation, we have suspended issuing Social Security Statements." Wonder what happened to the employees that produced the statements ? http://www.ssa.gov/mystatement/
