Three Texas counties have a model for reform that proves personal retirement accounts are more than just a conservative pipe dream.
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It’s Safe and It Works
What the Alternate Plan has demonstrated over 30 years is that personal retirement accounts work, and that many retirees make more than twice what they would have under Social Security. New county employees who have worked long enough in other jobs to qualify for Social Security keep those benefits, but they must also join the Alternate Plan. Of course, the reduced employment time will mean lower returns than if they had put in a full 30 or 40 years for the county.
A Model for Reform?
Roughly 25 percent of public employees — about 6 million people — are part of state and local government retirement plans outside of Social Security. Many of those plans are facing serious unfunded liability problems, just like Social Security. Those state and local plans do not have to wait for Congress to act — they can switch to the Alternate Plan immediately. However, state and local plans currently participating in Social Security are stuck. The Greenspan Commission, led by future Federal Reserve Chairman Alan Greenspan, closed that opt-out window in 1983.
That said, the Alternate Plan could also serve as a model for reforming Social Security itself. It provides all of the benefits of Social Security while avoiding the unfunded liabilities that are crippling the program — and our economy.
A retirement system that is prefunded and safe is not a dream. Three Texas counties have proven it can work. If states or Congress really want to address entitlement reform, the Alternate Plan is a good place to start.
This article is excerpted from a forthcoming publication of the National Center for Policy Analysis.
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