Mr. Bush's plan envisions that benefits promised to workers 55 and older would remain unchanged.
In excerpts released in advance of Wednesday night's speech, Mr. Bush pledges to work with Congress "to find the most effective combination" of revisions, although he has ruled out some remedies such as raising Social Security taxes.
"One of American's most important institutions — a symbol of trust between generations — is also in need of wise and effective reform," the president says.
The president will devote the first half of his 40-minute speech to domestic matters and the second half to international issues.
On the international front, Mr. Bush says last Sunday's election in Iraq "opens a new phase in our work in that country. We will increasingly focus our efforts on helping prepare more capable Iraqi security forces – forces with skilled officers, and an effective command structure."
Mr. Bush also promises to push forward for Mideast peace.
"The goal of two democratic states, Israel and Palestine, living side by side in peace, is within reach, and America will help them achieve that goal," the president says.
Recalling his inauguration theme of spreading freedom throughout the world, Mr. Bush says, "The only force powerful enough to stop the rise of tyranny and terror, and replace hatred with hope, is the force of human freedom."
With the United States spending more than $1 billion a week in Iraq, Mr. Bush will urge Congress to support his request for an additional $80 billion. "During this time of war we must continue to support our military and give them the tools for victory," he says.
He will also reaffirm his commitment to using diplomacy to deter the nuclear ambitions of North Korea and Iran.
In addition to Social Security reform, other domestic initiatives Mr. Bush is expected to mention in his speech include getting Congress to:
Mr. Bush's proposal to rewrite the income-tax code, meanwhile, is clearly an initiative on the back burner. A senior official who briefed reporters on the speech Tuesday didn't mention it when he first rattled off issues Mr. Bush would emphasize, although when pressed, said it remained a key Mr. Bush second-term item. The official said that making first term Mr. Bush tax cuts permanent also remained a priority.
Transforming Social Security is political gamble for Mr. Bush and for Republican allies wary of taking big political risks. While Mr. Bush cannot run for another term, most GOP lawmakers face re-election next year and are nervous about tampering with a system that Americans like and see no immediate need to overhaul.
Under Mr. Bush's Social Security plan, workers would be allowed to divert up to 4 percent of their pay into private investment accounts, according to a Social Security expert who was briefed on the plan Wednesday. Contributions would be capped at $1,000 per year, rising each year by $100. Social Security's guaranteed benefits would be reduced to make up for money diverted to the private accounts.
"We have a critical opportunity here to put together a system, that was just as good for the last century, for the next generation of our children and grandchildren," White House counselor Dan Bartlett said Wednesday on CBS's The Early Show. Mr. Bush "will speak directly to the Congress and give a way forward when it comes to how we can help individual, younger workers realize a better retirement in future generations."
On Iraq, Mr. Bush will encourage the international community to support the Iraqis following their historic election last weekend, urge the international community to help train Iraqi security forces and make the struggling nation a model for democratic reform in the Middle East.
Although he will propose that families of U.S. troops killed in Iraq, Afghanistan and war zones receive an extra $250,000 in government payments, Mr. Bush is not expected to outline any exit strategy for U.S. troops as Democrats in Congress are demanding.
Under pressure from his conservative base, the president will reiterate his plans to send Congress what he's described as a "tough budget, no doubt about it" — one which he claims will slice the federal budget deficit in half in five years.