Rhetoric Rules Debate on Social Security Reform

Kitces says these adjustments get to the real heart of Social Security reform -- they cut benefits, which is the only way to fix an unworkable system. People receiving benefits now are getting a much better rate of return than their contributions warrant, and workers now paying into the system are bankrolling those benefits. It will take 10 to 20 years for individual retirement accounts to provide returns that would offset shrinking benefits from the Social Security trust fund.

This gives me a real incentive to contribute to these accounts, because that's money I can keep," he says. "The rest of the money that you're putting into the fixed-income portion of the system is still going to be subject to reduced benefits."

Even if you put money into one of these accounts, Kitces warns there's no guarantee that you'd prosper. "A lot of people aren't good investors," he says. "They make decisions based on fear and greed, and that's the same as buying high and selling low. This is an opportunity to undermanage that money and have even less."

Under the third plan, workers would have to increase their own contributions to the system -- contributing another 1% of their taxable income to individual investment accounts -- in order to divert 2.5% of their existing Social Security taxes to the investment accounts. This so-called carve-out also would be capped at $1,000.

This plan would have similar provisions for low-wage earners and adjust for beneficiaries' longer life spans.

Kitces says that national savings habits will make this plan useless for all but those who can afford the voluntary contribution, but that anyone who could manage it would be protecting more of their money as the rest of the system weakens.

"It's very much the worst of the first two [proposals]," he says. "It's almost a hidden trick against people who keep their money in the regular system. "

Backers of reform say it will serve several generations.

"What we were doing on the commission was trying to not merely design a personal account plan, but to make the system more reliable and stable for us, our children and grandchildren," Mitchell says. "I'm a baby boomer, I'm 50, and I'm looking ahead to 15 years from now. I don't want the system to run out of money, and I'm focused on the near and dear."

Robert Ball, a Social Security commissioner from 1962 to 1973, says Bush's plan for retirement accounts is flawed.