Getting to the Bottom of Social Security

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Getting to the Bottom ofSocial Security

• Values Economics Influence

Lisa M. Maatz American Association of University
Women
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What is Social Security?

• SS is a national commitment through which we care
  for one another across the generations
• Its not an investment program its a social
  insurance program that protects against
  catastrophic loss of income
• SS is a shared risk program were all in it
  together

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How Social Security Works

• When we pay FICA taxes, workers receive SS
  credits at a maximum of 4 credits per year
• Employers and employees pay taxes equally into
  the system
• Only wages up to 90,000 are subject to SS taxes
• The amount of the SS benefit is based on a
  worker's top 35 years of earnings averaged over
  an entire working career
• Early retirement -- at age 62 -- means a lower
  guaranteed lifetime benefit over a longer period
  of time
• The age of retirement with full benefits is being
  incrementally raised from age 65 to age 67 for
  those born before 1960
• Social Security is a pay-as-you-go system
• Guaranteed, lifetime, inflation-protected benefit
• Administrative costs for the Social Security
  program are about 1 of benefits

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Social Security is not Simply a Retirement Program

• SS provides lifelong family protections
• Just half of all Social Security beneficiaries
  receive benefits solely as retired workers
• Remaining SS beneficiaries are children, widows,
  spouses, and people with disabilities
• Social Security supports more children than TANF
• For a young family, SS provides the equivalent of
  a 400,000 life insurance policy and a 350,000
  disability insurance policy
• 75 of private sector workers have no long-term
  disability insurance except for their SS
  coverage

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Social Security IS your Moms Retirement

• SS prevents massive poverty among the elderly
• Without SS, over half of all women 65 and older
  would be poor
• SS lifted nearly 7 million older women and 4.7
  million older men out of poverty in 2000
• The income that SS provides to the elderly
  benefits multiple generations, easing the
  financial burden on adult children who are saving
  for their own families
• homes, education, retirement

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Why are We Talking about theFuture of Social
Security?

• For the past several decades, the Social Security
  system has intentionally operated with a surplus
• More workers paying into the system than
  beneficiaries drawing on the system
  (pay-as-you-go)
• That surplus is placed into the SS Trust Fund
• When the baby boomers retire, the surpluses end
  and those funds are used for their benefits
• More beneficiaries drawing on the system, lower
  ratio of workers paying into it

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A Fictional Crisis

• Given the surplus in the SS Trust Fund, this
  increase in beneficiaries should not present a
  problem
• The federal government borrowed from the SS Trust
  Fund to cover discretionary spending priorities
  and mask the true extent of the deficit
• The SS Trust Fund was issued IOUs from the
  government in the form of interest-bearing
  Treasury bonds
• One of the most conservative and stable
  investments available

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A Long-term Question Not a Crisis

• The SS Trust Fund must be repaid to cover the
  expected benefit levels required in the coming
  years
• Starting in 2017 the bonds must be repaid
• SS still paying 100 of benefits
• Bonds will be fully repaid by
• SS Trustees 2041 CBO 2052
• Roughly 75-80 benefits thereafter

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Privatization IS the Crisis

• Privatization weakens SS Remember pay-as-you-go
• 2 trillion over 10 years
• 5 trillion over 20 years
• Takes away social insurance nature of the
  program, puts the risk on the individual
• The Presidential Commission's plan cuts SS
  benefits
• Changes SS benefit formula
• Even for those who work and contribute until
  retirement, CBO projects that private accounts
  are unlikely to make up for SS cuts

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Privatization IS the Crisis

• Enrolling in a private account may be voluntary
  (up to 4), but the cuts affects ALL future
  beneficiaries
• Even those who do NOT chose the private option
  for themselves
• SS benefits would be cut even further for those
  who contribute to a private account
• When working lives are cut short by death or
  disability, private accounts will be too small to
  make up for the difference

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Privatization Threatens UniqueSocial Insurance
Features

• Lifetime benefits that cannot be outlived
• Guaranteed, predictable benefits that dont
  fluctuate with the stock market
• Inflation protected benefits annual COLAs are
  particularly important to those with long
  lifespan
• Progressive benefit formula that replaces a
  higher of pre-retirement income to low earners
• Automatic and supplementary benefits for spouses,
  ex-spouses, and surviving spouses
• These protections cannot be replicated by private
  accounts

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Social Security Matters

• To Children
• Roughly 1 in 12 of all SS beneficiaries are
  children
• 5.4 million kids under age 18 lived in families
  where someone received SS
• Lifts millions of children out of poverty
• To Women
• Women's wages continue to lag significantly
  behind men's (76)
• Women live longer, poorer lives than men
• Women of color are most likely to be poor in old
  age
• Women are the primary caregivers for children and
  older people

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Social Security Matters

• To Racial and Ethnic Minorities
• 1 in 16 African American children receive SS
  benefits
• Latinos have higher average life expectancy
• Generally
• SS is the main source of retirement income
• Higher disability rates and lower lifetime wages
• Less likely to have income from private
  pensions/other assets
• To People with Disabilities
• A 20 year old today has a 1 in 6 chance of
  becoming disabled before reaching retirement
• SS provides lifetime income support to about
  730,000 disabled adult children (based on a
  parents work record)
• More than 1/3 of SS benefits are made to 17
  million people who are disabled workers and
  their dependents

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AAUWs Position

• Anti-privatization Strengthen, dont dismantle
  SS
• SS is the most successful anti-poverty program in
  the nations history
• Privatization proposals weaken Social
  Securitymaking the problem worse, not better
• Modest adjustments could ensure the Trust fund
  could pay of 100 of guaranteed benefits for the
  next 75 years

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Join AAUW in the Fight!

• For more information, visit
• http//www.aauw.org/issue_advocacy/index.cfm
• Action Network
• Note Special thanks to the National Womens Law
  Center for some statistical analysis used in this
  presentation