The $ 5,000 would be structured as a loan with an interest rate set by the government that would repay the social security trust fund with interest. Individuals who opt for the program would repay this money when they start receiving social security benefits. Their first checks would be used to repay the loan, for a period of up to three months. After that, they would receive normal benefits.
The plan was developed by Andrew Biggs of the American Enterprise Institute and Joshua Rauh of the Hoover Institution at Stanford University.
Social security advocates fear that this may be the start of efforts to cut the program. Currently, about 45 million retirees depend on social security, with average monthly benefits totaling $ 1,503.
In a statement, Richard Fiesta, executive director of the Alliance for Retired Americans, criticized the proposal.
“Asking American workers to forfeit one cent of their future social security benefits to survive the current economic crisis is a far-fetched idea that will hurt families for decades to come,” said Fiesta.
Joe Elsasser, president of Covisum, a social security software company, said he was skeptical about the idea.
“I am not a fan, mainly because I think it is the most vulnerable people who would be affected,” said Elsasser.
This would include those most in need of social security for longevity protection and old age insurance, he said.
And while such a plan can be structured to be actuarial fair and therefore not to harm social security funding, it could still hurt Americans’ bottom line.
“People are always surprised how much it will cost in 40 years to get $ 5,000 today,” said Elsasser.
The White House declined to comment.
This is a developing story. Please check back for updates.