SOCIAL SECURITY CHANGE MAY NOT HELP : PRIVATE INVESTMENT COULD PUT BABY BOOMERS AT MERCY OF MARKET.

Byline: R.A. Zaldivar Knight-Ridder Tribune News Wire

As Congress ponders how to overhaul Social Security to pay for the retirement of 78 million baby boomers, it's not just the sheer size of that generation that will be a problem.

Compared with their parents, baby boomers labor in a Chutes-and-Ladders economy of uneven rewards and unexpected pitfalls. Secure, middle-class factory jobs are scarce, and white-collar workers are no longer safe from layoffs. Boomers' lifestyles are also different. More are single mothers.

Experts say boomers who are struggling to stay in the middle class will carry that battle into retirement. As a result, Social Security could be even more important in keeping many of tomorrow's elderly out of poverty.

Replacing Social Security with a system that relies on individual accounts invested in stocks and bonds could undermine that goal. Bad investments or hard luck might dash hopes for a comfortable retirement.

``The increasing volatility and uncertainty in the economy could actually serve to make a safety net more important (for the baby boomers) than it has been during most of the post-World War II period,'' said Dallas Salisbury, head of the Employee Benefit Research Institute, an independent research group.

Two plans for creating individual investment accounts were presented to Congress by an advisory panel this week. Proponents say workers will get a better return from private accounts, and the economy will benefit from increased investment.

There's no denying that Social Security is headed for trouble. Benefit payments are projected to exceed tax collections in 2012, as boomers begin retiring. The basic problem: fewer workers per retiree. Whether the middle class embraces individual accounts as the answer remains to be seen.

``The crucial debate,'' said Salisbury, ``is going to be whether an individual accounts system will increase security or undermine it.''

Many people don't realize it, but Social Security works like an economic equalizer among the elderly.

Retirees who earned more in their careers get bigger monthly checks, but Social Security's benefit formula gives those who made less money a better return. That feature of Social Security could be watered down or lost under a system that relies more on individual accounts.

``There is going to be a greater disparity in the economic status of future retirees,'' said economist Marilyn Moon, a trustee of the Social Security system. ``We could end up exaggerating the unequal incomes that people will bring into retirement.''

Who might face new risks under an individual accounts system? Some of the answers are predictable, others more surprising:

Single parents: Some 11 million households are now headed by female baby boomers. Many working single mothers have had to forgo educational opportunities and take lower-wage jobs to keep families afloat. Their lifetime earnings are likely to be lower. The traditional system, which provides a more generous return for low-earners, might be better for them.

Middle-aged men: New statistics from the Employee Benefit Research Institute show a sharp drop in job tenure among middle-aged men during 1991-1996, years of recession and gradual recovery. Median job tenure for men aged 55-64 dropped from 15.5 to 12 years, and from 12.2 to 10 years for men aged 45-54. There's a strong link between the time on a job and a secure retirement. Middle-aged men who lose jobs might be tempted to somehow tap into their individual accounts prematurely.

The old-old: People over 85 are the fastest-growing population among the elderly. The longer you live, the more likely you are to exhaust your assets. Converting individual accounts to an annuity that pays retirees a fixed sum for life could be one option to reduce that risk.

Minorities: Fewer than 15 percent of the elderly were minorities in 1990, but the share is expected to rise to 25 percent by 2030, and 32 percent by 2050. Although living standards are improving for minorities, a disproportionate share still live in or near poverty. Their problems under a system of individual accounts could resemble those of single mothers.

Supporters of privatization say all those warnings don't change the fact that Social Security is underfinanced. In the long run, Congress will have to cut benefits, raise taxes or borrow money to keep the system going. And that means traditional Social Security is not a sure thing for the baby boomers.

Under the most far-reaching plan, that benefit would amount to about two-thirds of what a retiree would need to live at the official poverty line. Middle-class retirement would really depend on a worker's investment decisions. Should that be a cause for anxiety?

``If people begin to accumulate wealth, they are going to figure what to do with it,'' responded pension expert Sylvester Schieber, co-author of the privatization plan. ``The American people are not a bunch of ignorant cows.''