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Myths and truth on SS from AARP--part 2

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  • Byeline307@aol.com
    MYTHS AND TRUTHS ABOUT SS-part two 4)MYTH: The 77 million Baby Boomers marching toward retirement are going to break the system Truth: Reyes-- The
    Message 1 of 1 , Mar 11, 2005

      4)MYTH: "The 77 million Baby Boomers marching toward
      retirement are going to break the system"

      Truth: Reyes--"The oft-cited statistic is that by 2040 there
      will be just two workers for each retiree. (Today there
      just over three workers for each retiree.)" However,
      she points out while this stat is accurate, it fails to take
      into consideration that today's workers are a) more
      productive; b) earn higher wages and c) plan to work
      longer into the future at their jobs. All these factors
      add up to a surplus--a huge surplus building on that
      'boomer' population demographic.
      The system can be strengthened by small adjust-
      ments: "raising the cap on wages subject to Social
      Security (currently you're taxed on income up to
      $90,000) and investing part of the Social Security surplus
      in other vehicles that pay higher interest than Treasury
      bonds do."

      5) MYTH: "A system of private accounts would save Social

      Truth: "An ownership society," is becoming a part of the
      political lexicon; favoring privitization, some insist that
      if individuals invest their own money into stocks or
      bonds, etc., they would reap greater returns. AARP's
      director of federal affairs, David Certner, says, "It will
      just make the problem much worse." The cost to
      change over could be as high as $2-3 trillion, AARP's
      analyists estimate. "The amount of additonal national
      debt that would generate could eat into any returns
      people might actually get from a private account
      system," warns Barbara Kennelly, president and CEO
      of the National Committee to Preserve Social Security
      and Medicare..." (which has 3.2 million members)

      Secondly, this diversion of money means less dollars
      available to pay Social Security benefits, leaving the
      whole system with less of a reserve or cash to pay out
      benefits. That circumstance could lead to either raising
      taxes or cutting benefits. Doing nothing, on the other hand,
      would deplete the fund sooner than anticipated. {One way
      to reduce benefits would be to require workers to stay on the
      job longer by raising the retirement age.}

      6) MYTH: "Private accounts will give individuals more control"

      Truth: "People already have control over their money," offers
      Reyes, "when they invest in private pensions, IRA, and 401(k)
      plans. When combined with the solid foundation that Social
      Security provides, these are excellent vehicles for
      savings. "'What we should be doing is making these work
      better,' says Orszag."

      7) MYTH: "Individuals will get higher returns with private accounts"

      Truth: David Certner points out, "Under privatization, current
      workers will have to pay three times {3}. Once to ensure the
      benefits for those currently at or near retirement, once for
      themselves, and once more for those whose investments
      didn't pan out." Reyes underscores that statement by
      adding, "In the current Social Security system, the risk is
      near zero. You know it will be there regardless of what the
      market does. That's because United States Treasury bonds
      don't crash when the stock market does."

      So what is the conclusion? If it ain't broke, don't fix it!

      Marilyn Frith
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