Posted on 02/10/2005 3:35:11 PM PST by technochick99
Women live longer, earn less and fill more caretaking roles than men. For all these reasons they have a lot to lose if Social Security is changed, says economist Heather Boushey. So who would win? Wall Street brokers spring to her mind.
Editor's Note: The following is a commentary. The opinions expressed are those of the author and not necessarily the views of Women's eNews.
(WOMENSENEWS)--President Bush is talking about changing Social Security.
The word he bandies about is "reform," which harks back to progressive causes such as voting-rights reform. In those cases, to reform a system meant to change it to work more fairly for more people.
But this Bush-era reform is no way reformist in this sense. For women in particular, it could be a huge step backward.
Bush is pushing individual accounts, arguing that workers will benefit from investing in a broad mix of stocks and bonds. However, most employer-sponsored 401k plans allow workers to do just that. What most Americans no longer have is a pension that provides guaranteed, inflation-adjusted income during retirement--regardless of longevity. Social Security fills that gap.
If we move to a privatized system and it fails, it will be women who will have to pay the price. Not only do women depend disproportionately on Social Security, we are more likely than men to care for an aging parent. So without the insurance of inflation-adjusted lifetime income, more retirees could wind up relying on the time and generosity of their children. And that means more women would take on the added burden of elder care.
4 Percentage Point Plan
Bush has proposed allowing workers to invest up to 4 percentage points of their Social Security tax dollars in private retirement accounts. This money could be invested in broadly diversified stock and bond funds, much like the 401k plans that many Americans already have. Upon retirement, a worker could either draw down the account over time or convert the savings into an annuity or, in other words, a financial instrument that makes regular payments. For the duration of this annuity, it would pay a guaranteed income stream for the beneficiary and his or her surviving spouse (but not other dependents).
Workers will continue to have the remaining 2.2 percentage points of their Social Security tax dollars in the traditional Social Security plan, which provides inflation-adjusted benefits throughout retirement. The move to privatized accounts would be phased in only for those born after 1950, so today's retirees would see no changes under this reform.
On the upside, if a worker's portfolio earns more than 3.3 percent per year, he or she see would see higher benefits than those who left all their tax dollars in the traditional Social Security plan.
However, if returns are less, benefits will be comparable to those in the traditional plan. This might not sound so bad, until you keep in mind that the Bush administration is also expected to announce benefit cuts in addition to the private accounts. Regardless of whether an individual chooses a private account, once these proposed cuts are phased in over time, a worker who is 45 today would see a 15-percent cut in their future benefits, while those who are 35 today will see a 25 percent cut.
Women Have Much to Lose
Social Security, unlike private accounts, insures workers. As currently structured, it is designed to provide minimal income for retirees and income for people who become disabled and cannot work. (Supplemental Social Insurance addresses the needs of those who are disabled but have not worked.)
Women account for almost 60 percent of elderly Social Security beneficiaries and this guaranteed income allows them a decent standard of living.
Women continue to be more likely to stop working to care for a child or ill family member, which has implications for lifetime earnings. A recent study from the Institute for Women's Policy Research found that, over a 15-year span, women's earnings are 38 percent of men's. The causes are women's shorter employment histories, as well as women's lower wages when they work. Last year, full-time, full-year, women workers earned 75 cents on the dollar, compared to men.
Progressive Structure Helps Women
But even though women earn less from paid employment than men over a lifetime, the progressive structure of the current system--in which those with a lifetime of low earnings receive larger benefits relative to their contributions--benefits women. The system also provides disability insurance and dependent benefits. Thus, women relying on husbands for income are not destitute if something befalls him.
A privatized system does none of these things. Privatized accounts, unlike the benefits in Social Security, are based entirely on an individual's savings and returns. Therefore, while a mother is taking time off to care for a child, she (and her family) forgoes not only her earnings, but also on the ability to put funds into her privatized account.
Further, a privatized system would be riskier for women because they tend to live longer than men. Social Security provides guaranteed benefits to until death. A privatized system would pay benefits until the savings run out.
All of this raises a big question. If privatization is so risky, why do it?
The answer is that some proponents--Wall Street participants, in particular--will gain. Currently, administrative fees make up less than 0.5 percent of every dollar of Social Security benefits. Bush's Social Security commission estimated that the administrative costs of individual accounts would be about 10 times as high, much of which would go to brokers and Wall Street financiers. That's a lot more than what's being paid on Social Security and it could even be a low estimate. Just look at other nations that have moved to privatized plans: England and Chile have seen administrative costs as much as 30 times higher than our present system.
The bottom line: Bush's proposed plan entails risk and women have much too much to lose from it if it doesn't go according to the administration's optimistic scenarios.
Heather Boushey is an economist at the Center for Economic and Policy Research in Washington, D.C. She writes about the issues facing low-income workers and their families.
And, if they earn less; THEY PUT LESS INTO SOCIAL SECURITY.
If you put less into the system, it's it fair that you get less out? People who earn more than a certain amount, get the priviledge of paying 'their fair share', yet when it's their turn to collect, their Social Security check is capped at a pre-determined limit.
What about the poor drug addicts, the alcoholics and the bums who don't feel like working? Is it fair that they don't get free money? < /sarcasm off>
When someone dies, does the spouse still collect if he/she is not of retirement age?
True but it is a tax. And as long as it remains a tax then liberals will not want to reduce it in favor of private accounts.
Total idiot.
Diversification is the key. Not a single stock or single bond.
In any 10 rolling year period since the turn of the century the stock market is up 8-12 % and that includes the depression years.
If you buy an index fund that holds the whole universe of stocks, the only way for the fund to fail is if the entire economy of the US tanks and stays tanked.
We would be talking guns in the street time and getting your retirement check would be the least of your worries.
Yes, many of those who are saying not to get in the market don't realize that from 1995 to 2005, the market, both the DOW and the NASDAQ went up 260%. That includes after the rise and fall of 2000.
In Feb 1995, the DOW was at 4011, this Feb it was 10800.
In Feb 1995, the NASDAQ wad 793, this Feb it was 2100.
Even the S&P 500 went from 487 in Feb 1995 to 1200 this Feb.
So yes, if you put your money in all at one time, in Mar 2000, then you are still down a little in the Dow but quite a bit in the NASDAQ. But by dollar cost averaging in, like it is recommended for 401K's and IRA's, then you're probably doing quite well.
Do the math, do some research and I believe most will agree that the market provides the best (and a historically reliable) return over the long haul.
As it is now, SS is a tax, some part of which is used to pay welfare to retirees, another part is used to pay welfare to those disabled (and or their families) and the rest goes into the general fund.
The "Trust fund" has no assets. If I write you an IOU, you may consider it an asset. If I write myself an IOU, I have no assets, rather it is a reminder notice. The T-bills in the "trust fund" are analogous to the latter, they are promises by the government to pay the government. They are not assets.
In about 5 years the SS Tax will stop contributing to the general fund. At that time either other taxes will have to be raised, or other government activity will have to be cut.
In 2042 other (non-SS) taxes would have to be raised beyond funding the government without the input of SStax to higher levels to supplement the SS tax to keep the benefits at the same level as now. Or else other government activity will need to be cut, or else benifits will have to be cut, or some combination of the 3.
Of course some people want to raise taxes. Others do not.
The SS payroll tax is regressive. Warren Buffet doesnt pay it, since he gets no payroll, making his millions on speculation in the stock market. He also doesnt pay taxes on dividends, because his companies don't pay dividends. He should pay some capital gains tax on stocks that he sells higher than he bought them for, but can control that so he sells just enough winners to offset his losers, so his tax would be zero. His increasing net value is essentially not taxed. Clever guy.
I recommend that first, we get rid of the SS payroll tax. Then we call SS benefits what they are: Welfare. And means test it. Then adjust the tax regime to avoid crushing the economy. Then shrink the government to fit income.
Yeah, like that would ever happen....
Philosophy:
Poor people should not be taxed to pay rich people welfare.
Well, it doesn't strike me as risky. And it's sure working for the Chileans :)
As it is now, SS is a tax, some part of which is used to pay welfare to retirees, another part is used to pay welfare to those disabled (and or their families) and the rest goes into the general fund.
The "Trust fund" has no assets. If I write you an IOU, you may consider it an asset. If I write myself an IOU, I have no assets, rather it is a reminder notice. The T-bills in the "trust fund" are analogous to the latter, they are promises by the government to pay the government. They are not assets.
In about 5 years the SS Tax will stop contributing to the general fund. At that time either other taxes will have to be raised, or other government activity will have to be cut.
In 2042 other (non-SS) taxes would have to be raised beyond funding the government without the input of SStax to higher levels to supplement the SS tax to keep the benefits at the same level as now. Or else other government activity will need to be cut, or else benifits will have to be cut, or some combination of the 3.
Of course some people want to raise taxes. Others do not.
The SS payroll tax is regressive. Warren Buffet doesnt pay it, since he gets no payroll, making his millions on speculation in the stock market. He also doesnt pay taxes on dividends, because his companies don't pay dividends. He should pay some capital gains tax on stocks that he sells higher than he bought them for, but can control that so he sells just enough winners to offset his losers, so his tax would be zero. His increasing net value is essentially not taxed. Clever guy.
I recommend that first, we get rid of the SS payroll tax. Then we call SS benefits what they are: Welfare. And means test it. Then adjust the tax regime to avoid crushing the economy. Then shrink the government to fit income.
Yeah, like that would ever happen....
Philosophy:
Poor people should not be taxed to pay rich people welfare.
I want to know what part of voluntary Heather doesn't understand. Do nothing and nothing changes if a woman wants to keep the old system.
Sticking with a <1.5% return for 40+ years strikes me as risky, Give me the market anytime.
But you can't because they've banned smoking everywhere.
Still dims, they can't get anything right these days.
It's not risky so much as it is STOOPID :)
Social Security Fails.
Women and minorities hardest hit.
It is risky if one's intention is to have enough to retire on. A 1 or 1.5% return wont get you there. There is the little understood risk of being too risk-averse.
That was GREAT! Did you compose that? Very talented.
I don't expect to get something for not contributing, but I would expect to maintain credit for what I did contribute.
Here's a direct quote from the SS benefits mailing that they send you once a year.
This quote specifically concerns Disability, which I wouldn't count on collecting, but who knows what the future holds:
"To get benefits if you become disabled right now, you need 29 credits of work, and 20 of these credits had to be earned in the last 10 years. Your record shows you do not have enough credits in the right time period."
So a mother that chooses to stay home with her kids, loses the opportunity to count the credits she had earned previously (in my case the 13 years previous to my quitting work to stay home.)
The Democrats would be for the change, if they didn't want to make political hay out of Social Security. They have always demagogued this issue.
If your only incoming is going to be coming from SS, you betcha. The Chileans have been getting a far better rate of return, over 10% last I knew. I'm just ticked that so much gets sucked out of a paycheck anymore. If there's not the will to fix it, maybe we just ought to abolish Social Security and just roll it in with all the other welfare programs and means test it. We pay for schools we don't use, roads we don't drive, health care we don't get. We should just call Social Security what it is: welfare.
As a previous post has already stated, they live the longest of any socio-economic group and would therefore stand to gain the most in the long term.
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