The Sun Chronicle's Opinion section readers certainly care about Social Security and retirement. In response to my column on Social Security last week, several people e-mailed me asking for more details. Two particular themes stood out.

The first theme wondered: "How can Social Security possibly run out of money when we have more people working than are retired?" The second theme asked: "What are the options we have available to us to fix this looming problem?" Both are good questions.

It's true that there are more workers than retired persons. However, once the Social Security surplus runs out - mainly caused by the increasing cost of living and increasing number of Baby Boomers going into retirement - workers won't be paying enough or beneficiaries will be receiving too much to cover.

Let's look at this in simple numbers in a small scenario for illustration. Assume the cost of living is $3 a month, that there are 40 workers and 15 retired persons. Each worker pays $1 a month so that beneficiaries can get a check of $3 a month.

So, if we have 15 retired people x 12 months x $3 for the benefit, we need $540 a year for beneficiaries. However, if we have 40 workers x 12 months x $1 a month contribution, we only bring in $480 a year. We have a problem.

I'm leaving out a lot of details and not using real world numbers - it's easier to write about and read about this using small numbers. But this is the same situation we will be looking at after 2036 where we would have the same end result: even with more workers than retirees, if nothing changes from the current Social Security arrangement, benefits will be either too high or workers won't be paying enough. Complicating this issue, some experts argue that benefits are increasingly inadequate.

The only way to fix this is to 1) reduce benefits, 2) increase how much workers will pay, or 3) some combination of both options.

So what would some reform options to resolve the looming crisis look like?

The National Academy of Social Insurance detailed some options to raise funds: increase the Social Security contribution rate - i.e., workers could pay more; consider broader sources of income; raise or eliminate the tax cap (the current cap effectively assumes no one makes more than $106,800); use progressive taxes to cover Social Security's legacy costs; and diversify investments.

NASI also noted there are options to reduce benefits: reduce the cost of living adjustment; increase the age for full retirement benefits; lengthen the career-earnings averaging period; and reduce benefits for new beneficiaries.

The bipartisan Simpson-Bowles framework chose to fill part of the shortfall by increasing taxes and slowing the growth of Social Security benefits. But alas, in the end, no set of options is without critics.

An alternative to a government-run Social Security benefit program would be a mandated pre-funded retirement program, such as a 401(k). Typically, a 401(k) is a good retirement savings option where employees, with a match from the employer, deposit a small portion of their monthly paycheck into the 401(k) account over their entire career. Money in the 401(k) is invested, and depending on the chosen portfolio options, it can eventually amass a hefty retirement savings offering a 7 percent average yield.

But pre-funded mandates, such as a 401(k), need scrutiny. We need to know: 1) If a pre-funded mandate plan will be sufficient? 2) Would it cost the average beneficiary more money in the short-run? 3) Is a "pre-funded mandate" constitutional? 4) Market fluctuations affect the size of a pre-funded investment plan; would the government guarantee against fluctuations and inflation? 5) How will this affect non-traditional workers such as caregivers on leave from work, overseas workers, and workers in an informal economy? And lastly, 6) How much would it cost to move to a pre-funded program?

To the last point, if we suddenly moved away from the current "pay-go" system (workers today pay today's beneficiaries) to a "pre-funded" (today's workers are putting money into their own retirement) we would need to borrow about $14 trillion to cover beneficiaries who don't have a trust fund and rely on today's current workers. But sudden changes are unrealistic, whereas a gradual transition from pay-go to pre-funded might be more realistic.

The possibilities and complexities could go on. If there were a simple answer, it should have already been done by now. This is perhaps one of the most contentious and expensive public policy problems, which requires respecting all points of view and all competing interests.

PAUL HEROUX of Attleboro is a graduate of the London School of Economics and currently a master's candidate at Harvard University. He can be reached at Paul_Heroux@hks11.harvard.edu.

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