Democrats and Republicans have approached these goals in different ways, and its time to combine the best of both parties’ ideas. Republicans have long advanced the idea of personal accounts inside of Social Security. And it’s true that an accounts-based system that supplements, not supplants, Social Security is feasible. Democrats have argued that 401(k)s and personal savings are important supplements to Social Security, but that fees should be kept low so that lower-income Americans should enjoy the same opportunity to save as upper-income Americans. We can make that happen.

Here’s how. Building on the principles of personal accounts, universal savings and the desire for simplicity, we should create “Universal Savings Accounts” to supplement Social Security. Employers and employees would contribute 1 percent of paychecks on a tax-deductible basis. Additional contributions could be made to the accounts at individual worker’s or company’s discretion.

To ensure low management fees, these accounts would be managed by the private sector but overseen by a quasi-public board with fiduciary responsibility for the types of investment options that workers could select. This system is used by the successful federal 401(k) program, or Thrift Savings Plan, where the annual management fees have averaged 30 cents for every $1,000 invested. With this approach, Americans will know that money put away for retirement will be available for retirement.

Critics of "collective investment" charge that it would create enormous political risks by making government a major stockholder in America's largest companies. Aaron and Reischauer maintain that a Social Security version of the Federal Reserve Board could be set up to insulate investment decisions from politics.

But modernizers raise a more fundamental objection: In the name of protecting individuals from market risks, collective investment would deny them the opportunity to build personal wealth and take greater responsibility for managing their retirement security. This runs counter to important trends in the rest of society -- a shift from employer-sponsored "defined benefit" to employee-controlled "defined contribution" pension plans in the private sector and an unprecedented surge in mutual fund investments. Thanks to these developments, nearly half of the public now has some investment in the stock market. By diverting even a small portion of the payroll tax into personal retirement accounts, we could make stock ownership a near-universal experience. This would give millions of low-income workers the same chance affluent families have to harness the power of compound interest over the course of their careers.

Personal accounts would refashion Social Security from a system of wealth transfer into one that also promotes individual wealth creation and broader ownership. Workers would own their accounts and could pass on any assets they didn't use to their heirs. This approach would address a prime source of economic inequality in old age: relatively low savings among poor minority families. According to Rand Corporation economist Jim Smith, the median black or Hispanic older household has no financial wealth at all, making those households utterly dependent on Social Security. Indeed, most economists believe that Social Security's progressive benefit structure dampens low-income workers' incentive to save.