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Frequently Asked Questions

What would happen if I decided to opt into the new personal savings account system?

You would immediately begin contributing a portion of your monthly payroll tax into a personal savings account, which would immediately be yours to own. You would be able to invest the money in your account in a variety of different professionally managed funds based upon your goals and preferences. It will be quick and simple to switch the money in your account between different funds at your discretion.

Upon retirement, you become entitled to all of the contributions to your personal savings account, plus all investment returns.

Can I stay in the existing Social Security system if I choose?

Yes. Anyone who wants to continue paying payroll taxes into the current Social Security system, and receive traditional benefits at retirement may do so.

How much more could I potentially accrue in personal account benefits versus traditional Social Security over the course of my career?

Studies show that at standard, long term, market investment returns, for an average income, two-earner couple, over a career the accounts would accumulate to several hundred thousand dollars, even close to a million dollars or more, depending on exactly how much of their taxes are paid into the accounts. Even lower income workers could accumulate close to half a million over their careers.

Those accumulated funds would pay all workers of all income levels much higher benefits than traditional Social Security promises to pay. Retirees would each be free to choose to leave any portion of these funds to their families at death.

Would the Gingrich plan for personal savings account have an official retirement age?

No. You will be financing their own benefits through their own savings and investment, so you are free to voluntarily choose your own retirement age.

Where has personal savings account model succeeded before?

The entire nation of Chile switched to a personal savings account system in 1981. Under their personal account system, every Chilean worker contributes 10% of his monthly salary into an account. These account owners are free to invest their savings accounts in one of twenty different professionally-managed funds based on their needs and preferences.

By 2004, the average rate of return on these had averaged an astounding 10.2%. Payroll taxes were half as much, but benefits grew to twice as much: With such a strong rate of return, Chileans were on par to retire with almost 80% of their average late-career income.

A similar model exists already in the United States in Texas. In 1981, municipal employees in Galveston County decided to replace Social Security with a personal savings account model, having taken advantage of a since-closed loophole in federal law allowing public employees to do this.

The workers in Galveston paid about 10% of their salaries into the new accounts, slightly less than traditional Social Security contributions. A designated bank then invested the money in these funds, guaranteeing a minimum return. Since 1981, the average rate of return has been between 7.5% and 8% for the account-holders, resulting in benefits much higher than traditional Social Security.

How would personal savings accounts end the staggering deficits currently facing the Social Security system?

Today, Social Security may face over $15 trillion in unfunded liabilities – that is, future obligations to beneficiaries that we can’t currently afford. This is why so many politicians threaten to cut benefits or raise taxes to “save” Social Security.

The personal savings account model will wipe out this future debt. A study by Social Security’s Chief Actuary (who makes projections about future finances) predicted that most people would eventually shift from the traditional system to the personal account system. Everyone in the new system will eventually be self-sufficient, as they finance their own retirements with the savings and investment returns on their personal savings accounts. This means that individual taxpayers will no longer be required to finance other people’s benefits.

However, because employers will continue to pay their share of the payroll tax, the system will be able to cover the benefits of workers who decide to remain in traditional Social Security, as well as pay down existing liabilities in the system.

What if my investments lose value, and there is not enough money in my personal savings account on which to retire?

The Gingrich plan would be based off the Chilean model, which guarantees a minimum benefit to all retirees who choose the personal savings account. If the personal account for any individual were to fall below this threshold level, the government will cut this person a check from general revenues to make up the difference. In the three decades since instituting this guarantee, the Chilean government has not had to make a single payment on the guarantee – even in the midst of the worst financial crisis since the Great Depression.

Are there standards to ensure that the management of investment funds is professional and responsible?

Yes. Following the Chilean model and the plan proposed by Rep. Paul Ryan and former Sen. John Sununu, investment firms that want to participate in the new personal account system must apply to the Department of Treasury for approval. If approved, the fund would be added to a list of authorized funds in which Americans can choose to invest their personal savings accounts. The federal government would regulate these funds to ensure that portfolios are highly diversified and professionally managed.

However, consumer choice will ultimately drive the program. Funds can be tailored to meet different financial objectives, and the private firms will compete for customers. As long as the portfolios meet baseline legal requirements, fund managers will be able to offer products that invest in a diverse array of stocks, bonds and other investments.

Can I withdraw from the personal savings account at any point in my career?

The personal savings account is your property, but it is within a regulatory framework devoted to retirement, so it becomes available to you once you retire. The same can be said about traditional Social Security, whose benefits are not made available until retirement. However, you can use the personal account for anything in retirement, or leave it to your family – choices and options unavailable under traditional Social Security.