It is time to deal with Social Security's realities and to create a program that will provide our kids and grandkids with the same type of retirement security that our grandparents had. First off, Social Security did not spring fully formed from President Franklin Roosevelt's head in 1935: The original program didn't include any spousal or survivors benefits; it didn't cover farm workers; there were no annual COLAs to protect against inflation; and there was no disability coverage. Over the past 75 years, Social Security has been adjusted dozens of times to better meet an aging population's needs.

Second, talk about Social Security being in fine fiscal shape is misleading. The program is running $40 billion annual deficits at the moment. Those deficits are supposed to be paid by government bonds in its trust fund. But as President Bill Clinton's budget professionals pointed out, the money to repay those bonds can only come from more borrowing, higher taxes, cutting other programs or by cutting Social Security benefits. Today, that means more borrowing. At a time when the federal government borrows 42 cents for every dollar it spends, Social Security's deficits add to the problem.

The sad fact is that today's Social Security faces 25 percent benefit cuts for everyone receiving Social Security in just a couple decades. These cuts will hit every retiree, including the lowest income seniors. It is possible to prevent this catastrophe -- but every year we delay making changes, the eventual cost goes up.

Social Security needs to enter the 21st century. The Heritage Foundation recently released a long-term budget plan that showed how Congress could save Social Security without imposing massive tax hikes to pay for it.

First, the current complex benefit formula that no one other than a few experts can understand needs to be replaced with a flat benefit available to everyone who works a full career, regardless of their income.

This flat benefit would be set at $1,200 a month, just above the average amount for today's recipients. This is equal to 140 percent of poverty, and would be indexed for growth in wages. Today, roughly half of all Social Security benefits are below that amount. This means better benefits for widows and non-working spouses. With the new flat benefit, everyone will be protected against living in poverty in retirement. Plus, workers would know how much they could expect to receive and could plan accordingly.

Next, the retirement ages will be increased to reflect the fact that people are living longer today than in the past. The full retirement age would go to 68, while the early retirement age would rise to 65. Anyone who cannot physically work that long will be covered by disability payments until they reach those ages.

An important change will be to scale back Social Security benefits to the wealthy. Instead, scarce dollars will be reserved for those who really need them. It makes little sense to tax the middle class to pay benefits to Bill Gates, Steve Jobs, Donald Trump or Hollywood stars. The new Social Security would be insurance for every American senior, but only those who need it would actually collect benefits.

Retirees with non-Social Security income of more than $55,000 for individuals and $110,000 for couples would see their benefits start to shrink. Those with non-Social Security retirement incomes over $110,000 for individuals and $165,000 for couples would not receive benefits. This only affects about 9 percent of U.S. retirees, but it frees up money to improve the benefits for those who really need them. If upper-income seniors faced sudden financial changes, they would be eligible to receive benefits.

All U.S. workers will be encouraged to save more for retirement with a sharply improved savings plan that uses payroll deduction and automatic enrollment. This simplified system will be based on today's 401(k) and IRA system, but with changes designed to make saving easier with low-cost investments and better financial education programs. Together with the improved Social Security, retirement security should improve.

These changes would be gradually phased in, and existing retirees would not see any change at all other than a more accurate annual inflation adjustment. The result will be a Social Security system that is understandable, affordable and provides greater security.

David John is a senior research fellow in retirement security and financial institutions at the Thomas A. Roe Institute for Economic Policy Studies at The Heritage Foundation .