President Bush has formed a Social Security Commission to examine ways to reform the New Deal program. Americans should follow the citizens of other countries, such as Britain and Sweden, in recognizing that the best way to achieve real income security during retirement is to allow workers to use some of their payroll tax dollars to build an investment nest egg for their retirement years.

Social Security is the largest and most popular government entitlement program. Because of the retirement benefits it provides, millions of American workers have managed to avoid poverty after they retire. Unfortunately, it can longer make such a promise. (Note: The Social Security Commission's first report notes that cash deficits are projected to begin in 2016.)

Q: What is the concern over Social Security?

A: When the huge baby boomer generation starts retiring there will not be enough money to pay all the pensions.

Q: The Heritage Foundation supports reform. The opposition says reform is risky. Is it?

A: What's risky is not changing a system that is doomed to fail. There exists only three reform options: raising taxes, reducing benefits, or make the money work harder. The latter is the only acceptable solution.

Q: Doesn't it make sense to move slowly towards reform? How do we know it will work?

A: Australia, Chile, Poland, Sweden, Hungary and Argentina and many other countries have all reformed their systems. It works. It can be done.

Q: Social Security was first implemented in 1935, how many times has the program been changed?

A: The Social Security Act has been amended numerous times. There have been regular and substantial changes to the original act during virtually every administration since its inception.

Q: Retired individuals have already paid in. Is their money there waiting for them?

A: Money that comes to Washington is spent to provide benefits to current retirees. You sometimes hear about the "trust fund" and "lock box". These are accounting techniques that mask the true size of the problem. The truth is that in 2016 the government will start paying out more in benefits than it collects in payroll taxes. At that time, the government will have to start raising taxes or reducing benefits in order to keep the system solvent.

Q: Do private investment plans operate the same way?

A: No. Private pensions are financed by investing money that comes in so the assets accumulate by the time retirement comes. The rates of return under private pension plans are also much better.

Q: What is one thing you would tell individuals to help them support reform?

A: Private pensions belong to you. Politicians control Social Security and they can change the rules any time they want to.

Q: Why is Social Security a bad deal?

A: Social Security has become an increasingly bad deal for American workers. Though they pay extremely high taxes, they can expect a benefit return that is significantly lower than if they had invested those same tax dollars privately.

Q: No longer is it disputed that Social Security is running out of money. But, why is this happening?

A: There are two primary reasons: One, fewer payers per beneficiary: In 1950, 16 workers supported each Social Security recipient. Now there are barely three workers per recipient, and by 2030, the ratio will fall to two per beneficiary. The second reason is simply that people are living longer. In 1935 Americans were expected to live to about 77, today life expectancy is 82, and by 2040 it will be 84.

Q: What reforms would be most effective, and best for citizens?

A: The best way to achieve real income security during retirement is to allow workers to use some of their payroll tax dollars to build an investment nest egg for their retirement years.

Q: Heritage has published some reports examining rates-of-return, which is amazingly low among ethnic minorities and women. Why is this significant?

A: You have to examine a few facts about the program - and Heritage is proud to have David John doing a stellar job of that for us. African-American single males are more likely to die shortly after they retire. That means they have spent their working life paying into a system that gives them very little back, and creates no personal wealth they can pass on.

Poverty rates are highest for widowed, divorced and never-married women. And statistically women receive a higher percentage of their retirement income from Social Security than do men, and benefit reductions that would occur in the absence of reform could be debilitating.

Hispanic Americans, because they are younger than the general population, will enter retirement having received below market rates of return from the Social Security program.

Q: How much better would a private investment be for someone?

A: An example: for a 33-year old worker who pays into the program his entire career, can expect the return in benefits to be about 1.2 percent. Compare that with an average 7 percent (and low end 5 percent) return for investing the same amount in a portfolio of investments such as stock index funds.

Q: But what about when the market drops? Wouldn't it be crazy to rely on market fluctuations for retirement security?

A: In the real world, retirement investments have risk-limiting features to reduce losses from market fluctuations. Such features could be part of Social Security personal retirement accounts as well.

In one of his papers David John made exactly this point. (Bear Markets Do Not Hurt the Case for Social Security Retirement Accounts, ed.). Stocks are meant to be bought and held for long periods; thus, legislation creating personal retirement accounts should discourage short-term trading. Long-term studies have found that stocks held for longer periods of time always outperform bonds and Treasury bills.

Q: What happens if someone dies before they reach retirement? Where does that money go?

A: This point cannot be stressed enough. If a worker dies before retirement all of the Social Security taxes that he or she paid throughout the years will be lost unless the worker leaves either young children or a spouse who qualifies for a lower benefit - in addition, all families will receive a one-time-only $255 death benefit.

Q: So Social Security provides no element of wealth creation for an individual to pass on?

A: That's right. Not only are rates-of-return higher with individual retirement accounts, but the investment remains the property of the individual and creates a better wealth standing.

Q: This issue isn't all policy, there's politics involved. What are the chances for reform?

A: It is tough. Every aspect of the debate is politically charged. However, there are few issues that can prove to be of greater benefit to future generations.

This administration, by way of appointing the commission, has made a commitment to at least research the issue. Following a careful strategy of building support and improving information and education will lead to success and leave a legacy that any administration would be proud to claim.