Thursday, February 03, 2005


President Bush has said that those of us 55 years of age and older will not be affected; our Social Security program will remain the same. That is good news.

How about the Social Security program for the workers under age 55? Should we give them "ownership, choice and personal responsibility," by letting them cut their payroll (Social Security) taxes and invest the money in private, personal retirement accounts? Those who opt to put the 4% (4/7ths of their payroll taxes) into a private investment account would presumably take a 4/7ths reduction in their social insurance coverage under Social Security. Sounds all right.

If the boomer becomes disabled, his ["he" means "he" or "she"] Social Security check would be 3/7ths of what it would otherwise be; same with survivor’s benefits for the minor children of the boomer, and for the widow, if the boomer gets killed. When the boomer reaches 62 or 65 and retires, the retirement benefits would be 3/7ths of what they would otherwise be. The Medicare benefits would be 3/7ths of what they otherwise would be. That would be fair to all. If the boomer and his dependents can get by with 3/7ths, all would be okay.

Proponents say there will be no problem. They say the boomer will make up the 4/7ths cut in their social insurance coverage under Social Security, by the retirement account that they will build up through the investment of the taxes not paid as taxes. The employer contribution (another 4/7ths) would be added in for the boomer. The boomers earned it.

A basic question is whether we want the government to force the boomers to buy Social Security insurance. Many of us are worried that some boomers may cut their payroll taxes to Social Security, and make bad investments and end up on the public dole in their interminable old age, or when they are disabled; or that the boomer will make bad investments and die early and leave the widow and minor children on the public dole.

I suppose the government intends to keep control of the private investment accounts, and to require that such money be invested on Wall Street. Could not allow investment in real estate investment trusts, for example, or private corporations, limited liability companies or partnerships or small businesses. This government restriction cuts down on choice and personal responsibility, but there is still ownership. Proponents say that the nest egg can be passed on to heirs in the event that it is not all used up by date of death. True; but we could accomplish that by adding an ordinary life insurance component to the present Social Security.

Solve the worry that the boomer will blow the 4/7ths and come back for a hand out from the taxpayers, and more of us will throw in with you. So all the boomers have to do (or I suppose the government intends to do this for the boomers, whether the boomers like it or not) is to find a policy or plan of social insurance that provides disability insurance; survivor’s insurance for minor children; survivor’s insurance for the widow; an annuity for retirement; Medicare from age 65 until death; and provides a substantial lump sum to be inherited by the heirs upon the death of the boomer. This proposed policy should pay benefits that make up the difference between what Social Security as we know it would pay; and the amount that Social Security minus 4/7ths of the payroll taxes, would pay. And this proposed policy must be sure to pay off; it must be guaranteed 100% sure to be there and in place when needed.

A good starting place is to look for a policy that provides this coverage and is 100% sure. See what it costs. Maybe the personal savings accounts are a good deal for the boomers. We older people are out of the picture now, and we were either overreached by President Roosevelt or not; that cannot be changed. We do have a right, however, to express an opinion and vote as to whether our children and grandchildren should run the risk of having to provide a dole for well meaning boomers who make bad investments or simply blown their 4/7ths.

We should also remember that it is only those who make $80,000 per year or less who are prevented from investing a portion of their Social Security payroll taxes in personal investment accounts. Those who make over $80,000 per year pay no Social Security taxes on the overage. They are free to invest all the overage they can save from the cost of living (and progressive income taxes), and they are not limited to investing it in Wall Street. They can make real estate investments, or invest in closely held private business entities.

If the boomer makes $1 million a year, why is he so concerned about the 4/7ths of the Social Security payroll taxes on his first $80 thousand? If the boomer is in the bracket that makes less than $80,000 per year, he should pause and hesitate to act before dropping an insurance policy which provides all of the coverage that Social Security does, at the premium now required.

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