While many national issues are paralyzed by a delicate balance of power, there is a mandate to change the Social Security system. In considering reform of the system, it is evident that personal retirement accounts hold great promise to fund the future of millions of Americans. At the same time there are great risks that can destroy the advantages and present even greater dangers than the current system. There are six issues that are pivotal in determining success or failure of the reformed Social Security system.

The first pivotal issue is the Social Security Fund. Reform should include private investments as a restricted portion of the fund. In this way, there is a realistic view of the sufficiency of the fund to pay for the retirements of its participants. While the restricted fund is included in the total, wage earners invest as they choose.

The second pivotal issue is the benefits paid. The benefits must cover all who are in need in the short and long term. Maintaining the existing benefits structure and funding them first from personal retirement accounts and using the unrestricted fund for the difference accomplish this. Such an approach provides a safety net for those who make major errors in their investment choices, while discouraging risky investments.

The third pivotal issue is the administration of the reformed system. Adding new financial structures and the associated governing rules will only serve to exponentially increase the cost and complexity of administering a reformed system. Using existing retirement structures (401(k), IRA and other personal retirement plans) reduces the risk of an administrative logjam and attendant cost and fraud.

The fourth pivotal issue is wage-earner education. Experience in 401(k) and other participant controlled retirement plans has shown that the cost and complexity of participation exceeds that of any other aspect of the plan. Using existing financial structures greatly reduces the cost of this education for existing participants and transfers the burden of additional education to the private sector that will benefit from the reformed system.

The fifth pivotal issue is record keeping. Wage earners will find that much of the benefits of personal retirement accounts are consumed by the cost of record keeping in the early years. Whether paid indirectly by general tax revenue or directly by the personal retirement account, the wage earner will not realize the promised benefits. Altering existing private sector systems that now hold wage earner's retirement accounts will dramatically reduce initial development costs and minimize the effect on benefits. This will also provide high quality and expensive services such as multiple investment choices, daily valuation, unlimited changes and telephone service.

The sixth pivotal issue is the potential loss of tax revenue. The federal government currently taxes Social Security payments and a reformed system could reduce this revenue. The taxes paid on the increased distributions from existing retirement plans will more than offset the loss of revenue from taxes on Social Security payments.

* Article Source: Dalbar, Inc