Posted on 04/26/2005 1:03:47 AM PDT by Cincinatus' Wife
GALVESTON - While President Bush and other politicians argue the benefits and pitfalls of tinkering with the national Social Security system, employees of Galveston, Brazoria and Matagorda counties already have done without Social Security for more than 20 years
But despite so many years of experience with an alternate retirement system, opinions still are divided as to whether people fare better or worse than if they had participated throughout their working years in the federal program spawned by the Great Depression of the 1930s.
Either way, Bush is planning to highlight the so-called Galveston plan today at the University of Texas Medical Branch in Galveston as a way to promote his own proposals for overhauling Social Security.
The controversy about an alternate plan goes back to the early 1980s, when the three counties and some other local governments across the nation opted out of the Social Security program. In August 1983, Congress closed the opt-out loophole, even as Harris County and other counties considered setting up their own private retirement plans.
The plan's designers and supporters told the three coastal counties' workers at the time that their money would go into low-risk annuities and bonds, but said participants would receive several times the retirement benefits of Social Security.
Everyone's money went into the same investments to ensure that none lost while others gained.
Brazoria County Judge John Willy maintains that the county's private retirement program beats Social Security.
"It's been an excellent program," Willy said, adding that the county plan excludes investments in stocks such as the Bush administration has suggested as part of a Social Security revamp.
"All the screaming and hollering and shouting by those who say it wakes the dead and sends them running is just untrue."
But former Assistant Galveston County District Attorney George Cooley said he's not so sure the alternate plan has been better than Social Security, particularly for people who spend just a few years with the county.
'Safety net' for workers
The two plans are different, but they share an underlying philosophy that says Social Security isn't sacrosanct, and taxpayers may be better stewards of their own retirement funds than the government.
Bush has not proposed specific changes in Social Security to give workers choices on how to invest their money. He has been criticized for suggesting that workers be allowed to put their money into equities, or stocks, which expose investors to risk.
But Bush insists the system has to change. His administration estimates that in the next 75 years, Social Security will need $3.7 trillion more than it is expected to receive in payroll taxes to continue paying full benefits to all retirees.
Willy said that in more than two decades, no Brazoria County worker has lost money in the alternate plan.
"We've probably doubled what anyone could possibly have made off Social Security. Even in a bad market, we've been averaging 5 or 6 percent a year."
Houston businessman Richard Gornto is president of First Financial Benefits Inc., the firm that designed and still administers the alternate system.
According to First Financial Benefits figures, the alternate plan outshines Social Security.
A person who starts work at 25, makes $17,124 a year with no raises, and retires at 65, would receive a monthly benefit of $1,036.75 under the plan, according to First Financial. Under Social Security, that person would receive $683 a month.
The example assumes a 5 percent average annual return, an estimate Gornto maintains is conservative and reasonable to expect over 40 years.
A $75,000-a-year employee who works the same number of years would receive $4,540.83 a month under the plan. Social Security would pay $1,645, by First Financial's calculations.
But those are hypothetical cases. What about real people?
"It has worked out beautifully for me," said Carolyn Barnett, 58, who retired last year after 28 years as a deputy Galveston County clerk.
Barnett said she gets a $455 monthly check from the alternate program in addition to her pension check of more than $2,000 monthly.
Cooley, the former assistant Galveston County District Attorney, opposed switching from Social Security in 1981. Cooley, 60, retired in December 2002 after 30 years as a prosecutor.
He ended up with about $200,000 in the alternate plan.
"For me, it worked like a forced savings," Cooley said.
Instead of drawing monthly payments, Cooley has opted to draw out $40,000 a year over the next five years, allowing him to avoid a penalty for taking the entire lump sum.
With his pension, the amount of which he declined to disclose, Cooley said he is comfortable financially.
Joyce Longcoy receives about $460 a month from the alternate program, but she figures she would have received $1,000 or so if she'd participated in Social Security during her 23 years as a Galveston County court clerk.
As early as 1981, Longcoy said, alternate plan backers touted the program with claims that the Social Security fund might go bust before workers of the 1980s could collect, she said.
Some early investments of the alternate plan went awry, Longcoy said. Participants got back what they'd contributed but received no interest for three years when they'd expected 10 percent annual returns, Longcoy said.
Cindy Mora, 56, said she and many other county employees supported the plan because it kept politicians from messing with their money.
"I always felt secure knowing that what I was putting in, I was going to get back," said Mora, who retired as a district court coordinator in 2002 after 23 years with Galveston County. "It was such a safety net."
A positive track record
Both the Social Security Administration and the federal General Accounting Office compared the Texas counties' plans to Social Security in 1999.
Both studies noted that Social Security has a built-in inflation factor while the alternate plan offers no inflation protection. Both found that the alternate plan tends to benefit higher-paid employees more than low-wage earners. But each cautioned that individual benefit advantages in both programs depended on many factors, including marital status and number of dependents.
The GAO noted that the alternate plan's performance is not indicative of how workers might fare if they're allowed to invest part or all of the money that now goes to Social Security into the stock market.
Workers contribute 6.2 percent of their pay to the alternate plan, Gornto said. The county matches employee contributions and adds 1 percent, he said.
Supporters say the alternate program's track record speaks for itself.
Since its inception, the plan has averaged about 6.5 percent annual interest, Gornto said.
Willy said he believes the government can safely privatize Social Security as long as it sticks to conservative annuities — investments that guarantee minimum annual returns but can pay more — and bars workers from putting retirement money into high-risk stocks.
Chronicle reporter Julie Mason contributed to this story.
kevin.moran@chron.com
The story softens the truth by adding the words "claimed" or "said." But the only evidence that the Plan has done worse than Social Security is two people who do NOT have hard numbers who "said" they would have received more under SS.
The truth about SS can get out, even through a hostile MSM, but only if we pound the facts, pound the facts, and pound the facts some more.
Congressman Billybob
It's the textbook case everyone refers too.
The Chronicle had to do handsprings to make it a yawner!
The Galveston plan's impressive. It's easy to see why the MSM's staying away from it -- it's working.
The country of Chile instituted an SSI program (read link) that is private and is invested in the stock market. It is performing excellently. It is a shame that a third world country has more foresight and guts than the United States of America.
The only real way to have retirement security is to remove the funds out of the grasp of politicians. Conservatives and liberals alike are not to be trusted with any more cash than we are willing to risk.
I am in favor of a plan that the government requires its citizenry to invest a percentage of their earnings in an account that they can't touch until retirement. This account must be untouchable and un-manipulatable by the government also.
Retirement accounts invested mathematically to encompass American securities with the best performance such as the Standard and Poor's 500 and other such securities where the percentage of investment would automatically shift and divest from any company that falls from the performance lists. Percentage of investment would match the securities market share. A like investment model could be created to encompass the bond and real estate markets as well.
A mathematical performance requirement for investment qualification for a security would eliminate politician's ability to manipulate private investment funds. Such elimination of government participation, interference and fraud would streamline them and maximize yields
If comprehensive ssi is implemented (Bush's falls short) along with my other utopian ideas our country may escape the fate of all the great democracies of history.
Thank you for the post.
Only using the following example, I'm not so sure how good the plan is.
"It has worked out beautifully for me," said Carolyn Barnett, 58, who retired last year after 28 years as a deputy Galveston County clerk. Barnett said she gets a $455 monthly check from the alternate program in addition to her pension check of more than $2,000 monthly.
Without her $2,000 a month county pension, this woman would be toast. I retired after 28 years but my age at the time was 46. The current estimated amount of S.S. I'll get at age 62 is $965.
If she's only getting $455 a month at age 58 after working for 28 years, I wonder what the amount would've been if she'd put in another 4 years and retired at age 62.
I'm not sure whose better off, myself or Barnett. She definitely has a better pension plan than I do, but it looks like I'll get more from S.S. than she's getting from the alternate plan.
| Daryl L. Hunter - Editor |
All I've ever heard of this program has been rave reviews.
Now that Bush is pushing this idea for everyone, it's not such a hot idea.
This is a Houston Chronicle story, beware.
And Russia enacts a flat tax.
Why are we lagging behind?
When I retire I will have 47 plus years invested in SSI as it is today, this lady only had about 28 years into the Galveston plan, if she had a full careers investment it would be clear that the Galveston plan or Chile's plan would be far more beneficial.
Its that dang math thing!
We are stuck in Bureaucracy!
There is a moral component to this as well. The current Social Security scam is a socialist redistribution of wealth. Basically enslaving the younger generations to the retitees.
With personal Savings Acounts, the money would belong to you and would bring "generational wealth', as it could be passed on to your hiers.
Injecting free market capitalism into Social Security would benifit everyone... plus it would be voluntary, so, people like you, who don't have faith in capitalism (apperently) could stay in the old system.
The lies that the democrats and thier proxies(AARP, Unions) are spewing are shameful.
I've been anti-S.S. for decades. I started working a couple of years prior to the advent of Medicare and that just added insult to injury. I'd like to see both programs scrapped, but I doubt I'll see that in my lifetime.
The current Social Security scam is a socialist redistribution of wealth. Basically enslaving the younger generations to the retirees.
Pyramid schemes have a way of doing that and it gets worse for each new generation.
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