Writing in the Social Security Bulletin, Biggs and Springstead (2007:1) summarize their findings as showing “that replacement rates can vary considerably based on the definition of preretirement earnings used and whether replacement rates are measured on an individual or a [family] basis.”


For practical reasons, the committee did not consider options to fundamentally change the Social Security program as it has been structured from its establishment. Still, we recognize that many options exist and have been proposed to alter the program’s basic structure. One proposal has been to emphasize individual accounts by permitting wage earners to redirect part of their payroll tax payment to individual investment accounts for retirement—perhaps accounts that the wage earner would manage. This redirection of the payroll tax would lead to an offset—that is, a reduction—from regular Social Security benefits. There are many arguments on both sides of this approach; for discussion and analyses of various forms of individual accounts, see, e.g., Brown and Apfel (2006), Cogan and Mitchell (2003), and Furman (2005c).


Improvement in the program’s 75-year actuarial balance is one—though only one—yardstick for how our options would make the Social Security program solvent in the long term. It is used below to show how several reform provisions contribute to the program’s financial condition during that period. Tables C-1 and C-2 provide additional details for current law and each illustrative option.4 (See Table 6-1 for basic information on each option.)

Option 1:
Changes in Benefits Only; No Tax Changes

This option would increase the 75-year actuarial balance by 2.02 percent of the payroll under current law, bringing the finances into balance by this measure. (As of 2009, the program’s current balance is −2 percent.)

For individual provisions of Option 1:

  • The change in the preretirement formula for monthly benefits would account for 1.25 percent of the improvement in actuarial balance. This provision’s “progressive indexing” of benefits to a combination of wage and price levels would generally increase the preretirement benefit calculation more slowly than the current in-

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