Flying Without a Net

Reading The Christian Scientist Monitor's story "The retirement squeeze: How would they fix it?" which discusses Kerry and Bush's approach to solving the Social Security problem and The Kudzu Files' article on why he's opposed to the privatization of Social Security, led me to reflect on my own experiences with Social Security.

Many years ago when I was a caseworker I worked an old-age-assistance caseload. Essentially I helped administer the federally subsidized program for the State of Washington. My caseload consisted of retired people who received very little Social Security because they hadn't put much into it and whose fixed retirement income had quickly been decimated by a double-digit inflation rate. It was at best an awkward job for many of the clients felt ashamed to have to recieve assistance after fending for themselves their entire lives, and it was awkward for me because I felt sorry that I had to enforce what I considered vindictive rules. Luckily, as far as I can tell, there is no longer an old-age-assistance welfare program because the minimum Social Security is nearly as much as welfare was in the bad-old days.

Of course, unlike the people on my caseload, today's retirees paid money into the system and, as a result, receive more in Social Security than they would receive from welfare. In other words, Social Security serves as a safety net for those who, either out of necessity or neglect, fail to save enough money to retire once they are unable to work any longer. It is, as I see it, a mandatory retirement plan that insures that society does not have to bear the entire burden of taking care of someone who may not have saved enough for their old age.

My recent work as a taxpreparer also leads me to believe that Social Security may be even more important to a larger part of society if current job trends continue. While preparing taxes through the disastrous Bush economy I found that a large number of unemployed workers cashed in their IRA's and, worst of all, their 401K's in order to survive or to try to save their homes form foreclosure. If, as I suspect, workers can no longer count on steady, long-term employment with one company, one can only conjecture that more people will have to dip into their retirement savings in order to bridge the gap between jobs. While this will be a hardship for everyone, it could very likely prove disastrous for those who are at the lower end of the middle class, those who may have purchased homes with little down payment and who carry large credit card debts.

If workers are allowed to divert part of their Social Security into voluntary personal retirement accounts (PRAs) as Bush advocates, will they have access to that income for emergencies. If not, then in what real sense will participants be a part of what Bush calls an "ownership society." If they are allowed access to the money as they are to IRA's and 401K's, what will keep them from using the funds to live on during emergencies? And, yet, these are precisely the same people who may well need a "security net" when they are forced to retire. What will happen if these people end up with a drastic stock period like we've gone through the last few years and the value of their stock actually declines rather than grows?

While I don't think anyone, including Kerry, has offered any real solution to the Social Security crisis, I thinks Kerry's commitment to finding a way of saving Social Security is the only answer to this fast-approaching crisis.

Unfortunately for many retired Americans Social Security is the only thing that stands beween them and the streets. As the Christian Scientist article points out, "On average, poor Americans rely on Social Security for more than 80 percent of their income, while the wealthy rely on it for less than 20 percent." While I can't imagine having to live on only my Social Security, for many of our citizens it is the ultimate safety net. While I'm sure that many high-fliers in our society feel a safety net is for losers, it is a life saver for far too many Americans who have never entered the world of high finances.

2 thoughts on “Flying Without a Net

  1. Unless I marry rich, or my writing or photography is ‘discovered’ and I become an overnight sensation, I will be depending on social security. My mother is now, except that, luckily, she does have a good savings account from the sale of her house in Seattle.

    The private investment of part of the SS funds is the worst idea I’ve heard. It favors the rich, and will lead the poor into making foolish choices that could harm them when they’re older.

  2. I have an idea about how privatization of Social Security might work:

    A worker could have an account (“ISSA”) like an IRA– choose his own brokerage (or other financial institution(s)) at which to hold it, choose whichever investment vehicle(s) (except certain high-risk ones) he wanted, and pay the brokerage fees for making the investment transactions in the account. However, the brokerage would merely be holding the funds for the Social Security Administration of the government. The worker would retire and start collecting Social Security, and take distributions, just like from his IRA. The government would still continue to calculate the amount to which the worker would be entitled every month, and the SSA (through the brokerage) would pay it out. There could be special rules for a worker who bankrupted his ISSA, like by buying all stocks that went bankrupt– there would be some formula whereby his Social Security check would be reduced proportional to his losses.

What do you think?