My comments to AARP garnered this response for their opposition to Social Security personalization.
My comments are interspersed in bold ( I am not an AARP member, and don't intend to be if they continue to oppose S. S. reform.
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Thank you for contacting your AARP headquarters about proposals to divert Social Security payroll taxes to private accounts. It is always a pleasure to respond to a member (I'm not a member). These proposals are sometimes called Social Security "privatization," (This is a language manipulation effort to instill fear into people. What's wrong with converting payroll taxes to private investments. The money that the employee pays is his/hers before it becomes a FICA tax.) which means that parts of the current public program are moved to private management. (That's a good thing.) Like you, AARP is concerned that Americans reach retirement with adequate income.
Ideally, our retirement security should be supported by four pillars: Social Security, pensions and savings, earnings, and health insurance. (I agree, but more in savings via investments will, over the long term, produce a larger nest egg for income generation or spending down in retirement.) But for too many individuals, some of those pillars are weak and unsteady. The largest portion of retirement income for all but the highest income bracket is, and will continue to be, Social Security. (I disagree. This may be true now, but not necessarily so in the future, unless reform is thwarted.). The portion supplied by Social Security increases as people age. (This should also be true if part of the FICA tax is invested in personal accounts. That way the person would own the money, not the government.) That is why AARP is committed to maintaining the Social Security base as a lifetime, guaranteed, inflation-protected retirement income. In addition, we are committed to preserving Social Security's disability and survivors' insurance essential protections relied upon by so many families. (This is a good benefit that can be incorporated into a reform.)
Contrary to some popular notions, Social Security is not "broke." In 2003, the Social Security Trust Fund ran a surplus of about $153 billion in fiscal year 2003. That surplus was added to Social Security's accumulated reserves which currently total about $1.53trillion (Good information. I didn't know the amount. But is it sacrosanct?). Without any change to current law, Social Security has sufficient assets to pay full benefits until the year 2042 and to continue paying at about 70% of scheduled benefits after that, long into the future. (However, not a reason to delay action to change the system now to make it realistically produce what young wage earners should expect in these times. We are not coming out of a depression as was the case when S.S. began.)
There are long-term challenges to meet. AARP believes that Social Security's long-term financing should be strengthened sooner rather than later. (Good!) Changes will be smaller, and people affected by the changes will have more time to plan if steps are taken sooner rather later. However, it is crucial that we enact the right kind of reform. Future generations must be able to count on the same rock-solid guarantee of benefits that present retirees enjoy. Today, the monthly checks cannot be jeopardized by financial misfortune, eroded by inflation, nor depleted by a long life. (People are better served when they are empowered to manage their own lives and futures, to the extent they are capable, thus becoming less reliant on Government and less likely to look to it for their well-being.)
After careful study, AARP strongly opposes proposals to change Social Security by diverting any part of payroll tax revenues into private accounts. (An indefensible position compared to alternatives available.) Diverting a portion of Social Security funds would move Social Security away from a social insurance program to one composed, at least partially, of individual investment accounts that are funded with a percentage of current payroll taxes. (This is exactly as it should be.) Such "carve-out" accounts could expose many individuals to unnecessary risk, particularly low-wage workers who are much less likely to have other sources of retirement income. Carve-out accounts would also make Social Security's long-term problems much worse, sooner. Social Security is not an investment program. (Part of it should be. That's what the reform philosophy is all about.) It is designed to provide a guaranteed base of income under a 'progressive' benefit formula. (A progressive system is one in which lower-income workers benefit relatively more per dollar than the highest-income earners.) (It's a form of income transfer with the feds as mediators) While generally thought of as a retirement income program, Social Security payments also support the families of retired, deceased, and disabled workers. In fact, about 5 million children are supported, at least in part, by Social Security benefits. (No reason this should change drastically.)
AARP continues to stress the immediate value of Social Security to both younger and retired workers. Although younger workers may not be aware of the fundamental benefits Social Security provides, their payroll taxes give them and their families the protection of life insurance and guaranteed disability benefits, as well as retirement.
There is also a fairness issue. Because most current payroll tax dollars are paid out immediately to retirees, the transition to a private accounts system would be very expensive. Today 's younger workers would carry the transition burden. They would, in effect, have to pay twice - once toward their own future benefits and again for those currently receiving benefits. Most private account plans would require the government to borrow $1-2 trillion over the next 10 years, burdening all citizens with high interest costs and squeezing other vital public programs. In addition, the administrative price tag for millions of small private accounts would be much greater than the efficient 1% of revenue that administration of Social Security costs today. (Yes, there is a cost of transition, but that's better than doing nothing and waiting until benefits must be reduced or the retirement age increased. With private accounts, the money accumulated is not under government management.)
I hope this outline of AARP's position is helpful. Again, thank you for getting in touch with us. If there are any matters National Office staff can assist you with in the future, please don't hesitate to ask.
(I am not persuaded by any of AARP's arguments.)
June,
Member Service
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