Sunday, June 05, 2005
Star Tribune: Over their heads on Social Security?
According to Eric Black in today's Strib
You can leave it to your kids. If there is money left in your account when you die, it's part of your estate.
(bolding in original)
Black is responsible for covering Social Security reform for the Star Tribune and has devoted several columns to it. But this presentation is misleading.
According to the Pittsburgh Post Gazette, March 28, 2005:
According to senior administration officials:
You couldn't withdraw from or borrow against your account the way you can with 401(k) retirement savings plans or Individual Retirement Accounts.
You must buy an annuity on retiring that gives you a monthly payment for life.
the Bush plan similarly. MSNBC has a more descriptive take
According to a senior administration official who briefed reporters on the still-sketchy proposal this week, many workers who elect to participate in the personal account program would be required at retirement age to purchase an annuity to ensure they have a minimal stream of annual income for the rest of their life.
"We think it's very important that people not be in a position where their personal account money is withdrawn and it has the effect of pushing people into poverty," said the official, who provided the background on condition he not be identified. "We specifically say that the money that is not annuitized can be left as an inheritance." ...
The White House Social Security proposal would require workers to annuitize enough of their savings upon retirement to guarantee they would get at least enough monthly income to keep them above the poverty line, according to the anonymous administration official, whose remarks were transcribed and posted on the Web at washingtonpost.com.
If you live to retirement age, you start with your Social Security account. First you pay Uncle Sam the 3% clawback. From the rest, you buy an annuity to provide income for the rest of your life. Anything left over can be inherited. For most people, the bulk of their account will not be transferable at death. Black owed it to his readers to explain the appropriate deductions to give an accurate picture of what funds would be left in an account at death.
Black also describes one anti-privatization argument thusly:
Your payroll taxes are already spoken for -- to maintain benefits for those already at or near retirement. So the government is going to have to borrow the amount of money that goes into the private accounts.
Black's presentation is accurate, but lacking context. According to Paul Krugman, the government would have to borrow $15 trillion
over 45 years to fund private accounts. According to AFT
the figure is $5 trillion over the next 20 years. Dick Cheney has already acknowledged
a cost of more than $2 trillion. Alan Greenspan reports
$2 trillion over 10 years, $4.5 trillion over 20 years. There is, in fact, large agreement on the numbers over the next 20 or so years -- $2.8 trillion (Dick Cheney), $4.5 trillion (Greenspan), and $5 trillion (AFT, opposed to privatization). Readers deserve to know the extent of the borrowing. Give the people the numbers, let them decide whether we should let our children inherit another $5 trillion in debt.