Social Security - Claims and Truth

Claim: Social Security is not in crisis and does not need reform.

Truth:

• Fixing Social Security is a challenge today. If we wait, it will become a crisis.
• When the Baby Boomers retire, the system's surpluses will disappear, and the only options will be large tax increases or benefit cuts.
• By 2017 Social Security will begin paying out more than it collects in taxes. These deficits will grow very large, very fast.
• By 2041, the system will be broke and benefits will have to be cut by one-quarter across the board, with more cuts to follow.
• The current system is unsustainable because fewer and fewer workers must support more and more retirees:
  • In 1950 there were 16 workers paying in for every beneficiary taking out
  • Today there are only about 3 workers paying in for every beneficiary taking out
  • When today's younger workers retire, there will be just 2 workers paying in for every retiree collecting benefits
• If we act today, changes can be phased in gradually over a number of years. If we wait, future generations will be faced with changes that are large and abrupt.

Claim: Social Security reform with personal retirement accounts is too risky.

Truth:

• The real risk is in doing nothing because the current system is unsustainable.
• Personal retirement accounts would give workers the chance to earn higher rates of return—and receive higher benefits—than the current system can afford to pay.
• Workers could choose to invest only in guaranteed government bond funds, or a mix of bond and stock funds if they wished to take more risk in exchange for a higher return.
• Highly risky investments would not be allowed. Accounts would automatically shift from stocks to bonds as workers neared retirement, so a stock drop just prior to retirement wouldn't have great effect.
• At retirement, account balances would pay a portion of a worker's Social Security benefits, with the rest coming from the traditional program. Retirees couldn't draw down their balances all at once. A minimum income would be guaranteed.

Claim: Social Security reform with personal retirement accounts costs too much.

Truth:

• The longer we put this problem off, the more it will cost.
• Failing to implement this plan will put an even bigger burden on our children and grandchildren as more and more Baby Boomers retire.
• Lots of good ideas are on the table.
• Congress and the administration have to work together to find the most effective combination of reforms.

Claim: Social Security reform with personal retirement accounts favors the wealthy.

Truth:

• Social Security reform presents a precious—and voluntary—opportunity to enable lower-income Americans the option of saving and investing.
• Personal retirement accounts could be passed on to children and grandchildren, ensuring that no one gets cheated by Social Security because they died before or soon after they started collecting benefits.