No, hands off my retirement savings
President Bush was stumping for his Social Security reform plan in the Philadelphia area yesterday. My local newspaper ran a photo of some people opposed to his plan holding signs reading “Hands off my Social Security.” Most of those in the photo looked like either retirees or workers nearing retirement. What’s wrong with this picture?
Give yourself 5 points if you said that under Bush’s plan nothing will change for people 55 and older. They will continue paying into Social Security as they have all these years, and they will receive the benefits they have been counting on during retirement. And give yourself 10 points if you said that under every proposed plan private accounts are an option. If you want to stick with the government’s scheme, you are free to do so.
No, it is the AARP and other opponents of private accounts who want to have their hands on my retirement savings, telling me and my peers what I can and cannot do with 12% of my salary every month.
13 Responses to “No, hands off my retirement savings”
Here’s my reaction: “What do you mean ‘Hands off’? Isn’t that just what Bush is proposing–to move the government AWAY from confiscating your money?”
Cheese-and-rice, Eric. Again, it’s not 12% (unless you’re self-employed). It’s just over 6%.
greg
Greg, I thought it was actually only 4% that he was proposing.
Greg–6% paid by me from my base salary; 6% paid by my employer “on my behalf.” It’s still 12% of what my employer is paying for my labor (not counting benefits, of course). Hiding half of it is actually rather nefarious, if you ask me. TANSTAAFL.
And, of course, Balta’s right. Under Bush’s plan I only get control of a third of that 12%…eventually. It will be phased in, so at first I only get to control 1%.
Eric,
Now, I may not be seeing this correctly, and please feel free to correct my misperceptions, but isn’t a part of Bush’s plan the replacement of wage indexing with price indexing? The numbers I’ve seen with that change mean that for young workers, guaranteed benefits would go down up to 49 percent from today’s levels.
In this case, it doesn’t seem like much of a choice – you can opt out, and take a massive benefit cut, or you can opt in, and hope that you can claw your way back to the current level of guaranteed benefits (but probably in any case do better than the 49 percent cut).
No matter how you shake it its not still not our retirement money. The government will still dictate how much can be invested, where it can be invested, and when it can be taken out.
If we are going to be forced to save then I think each person should have full control over the 12% thats paid in. Ideally I would simply like the ability to opt out of SS altogether and handle my retirement money on my own.
As a pastor I pay 15% on my income to SSI. As a babyboomer I never have expected to see a nickel of that back. Anything that I could put into an SSI personal account would be gravy for my retirement. Anybody under 50 is planning on the government providing for their retirement better plan on living leanly.
Steve,
My understanding of the price indexing vs. wage indexing is that only becomes an issue after someone starts collecting benefits. Your initial benefits are determined based on some formula involving the wages from your last 5 years of employment. After that, benefits go up periodically (called a cost-of-living adjustment, COLA). COLA used to be based on wages, but Bush has suggested using prices instead as a better reflection of the cost of living.
But that’s just off the top of my head; I could be wrong.
I’ve actually read the opposite – that the price indexing is used to set the initial benefit levels. Here’s something from the Washington Post:
“Under the proposal, the first-year benefits for retirees would be calculated using inflation rates rather than the rise in wages over a worker’s lifetime.” (http://www.washingtonpost.com/wp-dyn/articles/A45726-2005Jan3.html)
Otherwise, I don’t think there would be enough savings in the plan to offset the massive up-front costs.
The real question is this (and I haven’t found the answer anywhere) – if I opt out of Bush’s plan, do I get the current guaranteed benefits, the price-index benefits, or something else in between?
Eric, you do have it wrong. In fact though Bush and company get apoplectic when it’s pointed out a comparison of what the current system would return to people your age versus the guaranteed portion of SS under his plans comes up with about 46% fewer dollars in benefits. These cuts will apply to anyone whether they opt in to the private account plan or not. In addition though Bush’s people don’t want to admit it for stocks to provide the return they claim they will would require the economy to outperform the forecasts they rely on to produce the bad numbers for the existing system.
While the system needs tweaking I resent those on the right that attempt to imply that the privatization plan is part of the fix. The only fix included in the Bush plan as “leaked” is benefit cuts. Similar to Governor Blunt’s Medicaid reform in Missouri.
Forced “Voluntary” Privatization
Eric Seymour is repeating a common argument of those who support social security privatization – it’s “voluntary”:
And give yourself 10 points if you said that under every proposed plan private accounts are an option. If you want to stick with th…
Greg–6% paid by me from my base salary; 6% paid by my employer “on my behalf.” It’s still 12% of what my employer is paying for my labor
Your employer needs a new accountant, then.
greg, in “the lowest rate of taxation isn’t zero” mode
No, hands off my retirement savings
The phrase “guaranteed benefits” has been used a lot recently to describe the future benefits under the existing Social Security system. It shouldn’t be; benefits under Social Security are not guaranteed.