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The AARP Rejects Bush's Private Retirement Financing As the debate over the future of Social Security stormed into 2005, the American Association of Retired Persons kicked off an ad campaign to push against cuts. In full-page advertisements running in 53 daily papers and six publications influential to Capitol Hill lawmakers, AARP warned against the risks of turning Social Security into a program based on private investments. "Winners and losers are stock market terms. Do you really want them to become retirement terms?" the ads asked. Social Secuirty is the only guaranteed source of retirement income for millions of American senior citizens. AARP wants it safeguarded, especially as life expectancy increases and seniors become more fearful that their savings, even if considerable, won't see them safely through life. "AARP will not agree to jeopardize people's Social Security benefits," said President Marie Smith. "Americans are saving too little, whether on their own or through plans such as 401(k)s, [to depend on,]" she added. The Bush administration has favored tweaking the formula by which initial Social Security benefits are calculated, cutting promised benefits by nearly a third in the coming decades. The White House hopes that some, if not all, of those benefit cuts would be made up by gains in newly created personal investment accounts that would harness returns on stocks and bonds. AARP CEO Bill Novelli said, "There are right ways and wrong ways to strengthen Social Security. Passing on several trillion dollars in additional federal debt to future generations as a result of diverting money away from Social Security to fund private accounts is the wrong way." "We are not advocating for the status quo," he explained. "We need to make a series of modest changes sooner rather than later to strengthen the program for future generations. But siphoning funds out of Social Security to finance private accounts could make the program's financial outlook worse." Currently, initial benefits are set by a complex formula that calculates workers' average annual earnings in their 35 highest-paid years, adjusting those earnings upwards to reflect standards of living near the worker's retirement age. The adjustment is based on wage growth over that time span. Under the commission plan, the adjustment would be based instead on the rise of consumer prices – a much slower rate of increase. The change could save the Federal Reserve trillions of dollars in scheduled expenditures, but at a cost. According to the Social Security Administration's chief actuary, a middle-class worker retiring in 2022 would see guaranteed benefits cut by 9.9 percent. And the loss would keep increasing: by 2042, average monthly benefits for middle- and high-income workers would fall by more than a quarter. By 2075, a retiree would receive only 54% of current benefit levels. It's a rate of change that has many seniors and soon-to-be-retirees worried. Many are looking to finance professionals for advice and counting their expenditures with more care. Facing new uncertainty, it may be time for retirees to re-evaluate their financial future. Back To Mature Market News → Go To The GenerationTarget.com Mature Market Bookstore → |
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