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Retirees & Social Security

Five Good Reasons to Fight Privatization

1. Private accounts put your retiree benefits at risk. You may have heard that private accounts won't affect people who are already retired. But that may not be true. Private accounts put everyone's benefits at risk because the contributions made by today's workers are used to cover the benefits of today's recipients. That means the money needed to fund private accounts is the same money needed to pay current benefits. Everyone knows, you can't spend the same money twice.

President Bush may promise not to cut your benefits, but he'll be leaving office in 2008. He can't guarantee what future presidents and congresses will do when faced with mounting budget deficits and the need to maintain funding for workers' private Social Security accounts.

2. Private accounts are no free lunch. Setting up private accounts for younger workers will cost nearly $5 trillion over the next 20 years. The only way to cover the cost is to borrow the money (probably from countries like China and Japan) and saddle your children and grandchildren with enormous debt; raise payroll contributions (the President has ruled this out); or cut benefits for current retirees.

3. Your grandchildren will see their future retirement benefits cut by an average of $150,000. The President's Social Security plan calls for huge benefit cuts for future retirees. Even if your grandkids don't participate in a private account, Bush's plan would cut their benefits by 20-50 percent — the result of his proposal to change the Social Security benefit formula. Over the course of their retirement, that loss will be substantial. Clearly, this plan ensures that future generations of your family will not enjoy the same level of retirement security that you have.

4. The government will take back most of the money in private accounts. Under the President's plan, if your children and grandchildren decide to put some of their Social Security contributions in a private account, the government will take back at least 70 cents in benefits for every dollar in their account when they retire (or become disabled or die before retirement).

This reduction will come on top of the 20-50 percent cut that results from the President's change in the benefit formula (see #3, above) — decimating Social Security's guaranteed benefits for millions. In addition, account holders will have to pay hefty management fees to Wall Street brokers and, at retirement, may also be required to convert their accounts to annuities that pay monthly benefits. So, contrary to the President's statements, there will be little left in these accounts to pass along to heirs.

5. The President's solution is worse than the problem. Social Security's Trustees (all Bush appointees) say the system will be able to pay all benefits through 2041 and 73 percent thereafter. The resulting shortfall is a manageable problem, not a crisis. The White House admits that private accounts will not solve the shortfall. In fact, the huge cost of the accounts could hasten the shortfall and make it bigger.

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