WASHINGTON (Reuters) - Republican presidential candidate Fred Thompson waded into the politically potent issue of Social Security on Friday and proposed overhauling the retirement system by creating 401(k)-style personal accounts.
Tampering with Social Security is fraught with political peril and President George W. Bush’s attempts to change it during his second term fizzled as lawmakers balked at his drive to create private investment accounts subject to the whims of the stock market.
Thompson, a former senator from Tennessee, is seeking to show he is willing to take on tough issues if elected in November 2008, telling a news conference in Washington he was the only candidate to offer an extensive Social Security plan.
Like Bush’s plan, Thompson’s would include investments in the stock market. But he said his proposal was different because it would be strictly voluntary and would be added to the Social Security system rather than carved out of it.
With the post-World War Two “baby-boom generation” beginning to reach retirement age, the Social Security system is expected to come under strain in coming years and could run out of money by 2041 if left as it is.
“The ugly truth is that we’re going to lose it as we know it if we don’t do something about it,” Thompson said.
Democratic presidential candidate Barack Obama, a senator from Illinois, said Thompson’s plan would undermine Social Security and “if we simply ask higher income Americans to contribute a little more, we can shore up Social Security for generations to come.”
“George Bush already tried to privatize Social Security, and the American people soundly rejected his plan. The way to strengthen Social Security is not to slash benefits, raise the retirement age, or subject people’s retirement to the whims of the stock market,” Obama said.
Thompson is running a distant second in some national polls behind Rudy Giuliani as a candidate for the Republican nomination for the 2008 presidential election.
But he is far behind the leaders in the early voting states of Iowa and New Hampshire.
Thompson would leave Social Security benefits unchanged for people who are currently retired or are near retirement. No one now over the age of 57 would be affected.
He would provide voluntary personal retirement “add-on” accounts to supplement benefits and index the program’s benefit system to prices instead of wages, as is done under the current plan.
Thompson’s plan would give current workers the option of making voluntary contributions into personal retirement accounts similar to a 401(k) plan.
Workers would be able to contribute 2 percent of their monthly wages and the federal government would match that contribution.
Thompson said under his plan, a worker earning $40,000 a year who started contributing to the plan at age 22 and worked until age 67 would accumulate more than $280,000 for retirement.
He said he opposed trying to overhaul Social Security by raising taxes on wealthier Americans, as some Democratic candidates have proposed.