Social Security: America's Promise to Families Past, Present and into the Future

Article submitted by AARP Illinois.
For more information on the Social Security debate visit www.aarp.org/socialsecurity or call 1-888-687-2277.

Social Security is a crucial part of America's retirement security system and probably the most successful federal program in history. People look upon it as a promise -without an expiration date- that our nation has made to America's workers and to those who have completed their work life, our retirees.

The program has been periodically re-tuned as the workforce and work skills have changed. Yet, its administrative expenses remain the lowest of any government program-less than 1%. While the program insures families against loss of their breadwinner throughout life, Social Security also has proven to help millions of older Americans maintain their standard of living in retirement.

One of four pillars. Social Security is only part of the overall retirement security structure. A secure retirement is supported by four pillars: 1. Social Security, 2. Pensions and savings, 3. Continued earnings, and 4. Adequate and affordable health insurance. In that context, the importance of Social Security today is evident as each of the other pillars faces mounting pressures.

Less than 50% of working Americans have a pension plan available at their workplace, so half of all private sector workers have no regular payroll deduction mechanism to save for their future. Traditional defined benefit pensions are disappearing. Many companies that do offer pensions are converting to defined contribution plans, making workers absorb more risk. Defined contribution plans are subject to early withdrawals, poor investment decisions, and the failure to annuitize the account balance upon retirement. So, even if a worker has contributed to a retirement savings plan, it is likely to provide for a much less adequate retirement income level than defined benefit pensions.

Personal savings are at an all-time low according to Federal Reserve figures, and personal debt at an all-time high. Rising health care costs also put strain on the goal of economic security. As health care expenses go up at almost double digits annually, insurers are reducing offerings, raising prices and shifting costs. Employers are cutting back on employee health benefits and retiree health benefits alike. So retirees are paying larger and larger portions of their post-work income for health care. Even with Medicare eligibility the average older American is spending nearly a third of income for health care.

The average American today will need to work longer before retiring in order to: educate the kids, possibly assist elderly parents, save adequately for retirement without supplemental benefits from a company pension to count on, and meet ever-rising out-of-pocket health care costs. Since other pillars are under so much pressure, the need to strengthen Social Security is all the more important. AARP believes that Social Security needs to be strengthened now for our children and grandchildren. But the solution shouldn't be worse than the problem! Unfortunately, private accounts that drain money out of Social Security clearly are a "solution" that is far worse than the problem. They would cut Social Security's guaranteed benefits substantially, while passing a huge burden of debt on to future generations.