Nobel laureate Richard Thaler has put forward a new idea to allow individuals to use their 401(k) savings to increase their Social Security benefits. Thaler, a behavioral economist and professor at the University of Chicago Booth School of Business, discussed the idea at an event hosted by the Brookings Institution, a non-profit public policy organization, last week. According to Thaler, retirement savers face two problems when it comes to managing their money: how to effectively save for their golden years, and then how to make that pot of money last for the rest of their lives. "You have to worry about getting unlucky and living to 100," Thaler said.

U.S. economist Richard Thaler won the 2017 Nobel Economics Prize Scott Olson | Getty Images

That retirement income problem is amplified by a cultural change for today's retirees. While previous generations entered retirement with their mortgages paid off, today's retirees typically have high debts and insufficient savings, Thaler said. That's where Thaler said his new idea regarding Social Security benefits would come in. The plan would let you take a portion of your 401(k) benefits — say, $100,000 or up to $250,000 — and send it to the Social Security Administration. What you would get in return would be the only indexed annuity that's guaranteed by the federal government at a fair actuarial value, Thaler said. "This may seem like a wild and crazy idea, but actually all the math has already been done by the Social Security Administration," Thaler said. That is because the system already adjusts your benefits for your age, for each year you work and the income you take in while receiving benefits, he said. But Social Security experts do not necessarily think the plan is that simple. Boston University economics professor Laurence Kotlikoff said he thinks Thaler's plan is "dicey" and worries how it would impact the future of Social Security. As it stands, Social Security will only be able fund about 80% of promised benefits by 2035, provided Congress does not intervene, it was announced on Monday.