Sununu Calls for Personal Savings Retirement Plan
WASHINGTON, Feb. 3 – Sen. John Sununu, R-N.H., called Thursday for immediate action in reforming Social Security, saying that allowing people to create personal savings accounts for retirement would give them “more power.”
“If you believe that we ought to make changes, now is the time to do it to be able to transition gradually… to a system that gives individuals more power, more control and more long-term opportunity to make investments.,” Sununu said during a forum at the National Press Club.
The Social Security program is not meeting the needs of current demographics or the increase in life expectancy, Sununu said.
“To stick with this system as it was designed, to me is like saying you have to stick with the rotary phone,” said Stephen Moore, a senior fellow at the Cato Institute, who also spoke at the forum. “The system is in dire need of modernization.”
Sununu introduced a bill last September that would have allowed workers to invest 10 percent of the first $10,000 of their wages in personal retirement accounts. On wages above $10,000, they would have been able to put five percent of their taxable wages into their personal savings accounts. The money invested would have come out of the Social Security payroll tax, which is currently 12.4 percent of wages.
Investors would have had several regulated investment options, including stocks and bonds, much like the Thrift Savings Plan for federal employees, according to a press release from Sununu when he introduced the bill. The plan also would have guaranteed a minimum benefit.
“This kind of reform is of enormous value to people earning say $20,000 or $30,000,” he said. “If you are earning $30,000 a year and paying more than $3,000 or $3,500 in payroll taxes, that makes it pretty tough for you to have disposable income available to invest in IRAs and 401Ks.”
Sununu said in a press release that he plans to reintroduce the bill this term.
Sen. Jon Corzine, D-N.J., and New York Times economic columnist Paul Krugman also participated in the forum. Both opposed Sununu’s plan-and the similar one President Bush outlined in his State of the Union address..
The Social Security program should not be eliminated, Krugman said, because the federal government has a responsibility to protect its citizens from poverty.
“No one is preventing people from investing on their own.. Social Security is the great pillar of security in case that stuff doesn’t work out,” he said.
Sununu said his system would give people more “ownership” over their money.
“Many people feel uncomfortable with the idea of empowering the individual,” Sununu said. “Bad things sometimes happen when people make bad decisions, but that is not a reason to oppose the idea of giving them a little bit more power, a little bit more responsibility, and a little bit more voice in the future.”
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