The latest idea being embraced by opponents of President Bush’s Social Security reform plan is “add-ons.”

Many Democrats and Rep. Clay Shaw (R-Fla.) are arguing that personal accounts are a good idea but don’t have to be an alternative to the current Social Security system. Instead, they say, why not keep Social Security as it is and let people “add on” some investment?

That argument makes little sense. It won’t make the Social Security system solvent when it starts to run out of money in 13 years. More important, it won’t help people who need Social Security accounts the most.

After all, we already have “add-ons.” We have IRAs and 401(k)s. Most workers above the median income put some of their money into those programs. Indeed, 40 percent of American households have IRAs, and others have 401(k) accounts through their employers.

These tax-deferred savings vehicles are great for taxpayers with a little money to spare. But some workers can’t afford to put anything aside once they’ve put 12.4 percent of each paycheck into Social Security taxes. Those are the workers who would benefit from a program of personal Social Security accounts, and add-ons won’t help them.

Dramatically more Americans own financial assets now than in the recent past. As recently as 1980, only 4.6 million U.S. households owned mutual funds; by 2003 the number was 53.3 million.

More than half of American families currently own stocks, bonds or real estate. Nearly half of all U.S. households own stocks or stock mutual funds.

But not all households are participating in the stock market. “The majority of working Americans have not benefited directly from the rise in stock prices,” says Stephen Brobeck, head of the Consumer Federation of America. “In fact, more than half of all households hold no stock.”

Among people with annual household incomes of $75,000 or more, 84 percent own stocks or stock funds; among those with incomes less than $30,000, stock ownership is only 26 percent. White households had an average net worth of $468,200 in 2001, more than six times the $75,700 of black households.

That’s why Social Security personal accounts would mean so much to low-income families. A good plan would allow workers up to age 55 to put their Social Security taxes into private accounts, which they could invest in stocks, bonds, mutual funds or other financial assets. Michael Tanner of the Cato Institute proposes to allow workers to divert the entire employee’s half of the Social Security payroll tax — or 6.2 percent of wages — into individually owned, privately invested accounts.

Younger workers who choose the individual account option would receive benefits substantially higher than those that could be paid under traditional Social Security. At the same time, the plan would allow low-income workers to accumulate real wealth.

Workers who choose the individual account option would forgo future benefits under traditional Social Security, but they would receive a bond in recognition of their past contributions to Social Security. That bond, redeemable only at retirement age, would be based on accrued benefits under the current system.

Under that plan, workers would build a real nest egg for their own retirement. And every worker could afford to do it. Low-income workers are already being forced to put 12.4 of their earnings into a Social Security system that promises them a low rate of return, and can’t even pay what little it promises. They would be much better off if they could put that money into their own account and earn a more comfortable retirement.

So what would add-ons do for them? They would raise every worker’s taxes. Democratic economist Edward M. Gramlich has proposed that workers be required to contribute an additional 1.6 percent of their wages into private accounts — an “add-on” that would mean higher taxes for declining benefits. Strangely enough, Democratic members of Congress are speaking favorably about such an approach.

Rep. Shaw proposes to make the add-on voluntary. But if workers could afford to invest more, they could open an IRA. A voluntary add-on is not a plan; it’s a diversion.

Personal accounts mean ownership. Instead of hoping that future Congresses will come up with new tax revenue to pay future Social Security recipients, workers could invest their own money in their own accounts and rely on them. And they would have a personal nest egg that they could leave to their children.

The Social Security reform battle is all about the working and middle-class Americans who don’t currently own stocks or mutual funds. Those Americans need accounts they can call their own, accounts they can rely on, accounts they can pass on to their children.

Boaz is executive vice president of the Cato Institute, which maintains a website at www.socialsecurity.org.