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Don't dismantle Social Security.

As we pursue our national goal of economic security in retirement, it is clear that Social Security needs to be strengthened now for our children and grandchildren. But we must make sure that the solution is not worse than the problem.

One path we should avoid is to take money out of Social Security payroll taxes for private investment accounts. This would worsen the solvency outlook rather than improve it and could lead to large benefit cuts. Most people already realize this. Our research shows that 70 percent of adults 30 and older believe that Social Security should be protected as a guaranteed benefit and should not be privatized.

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Private accounts that drain money out of Social Security would cut guaranteed benefits while passing the bill on to future generations. Diverting a third of the payroll contributions paid into Social Security (the amount usually suggested for private accounts) would create an estimated shortfall of some two trillion dollars in the program that eventually would have to be covered by raising taxes, cutting benefits, and taking on new debt.

In addition, private accounts introduce risk into essential retirement security. The essence of Social Security is to assure predictable, stable retirement income. Private accounts in Social Security threaten that guarantee. There are places in retirement planning that are appropriate for taking some risks--such as 401(k) plans and IRAs--but Social Security isn't one of them.

It is not necessary to dismantle Social Security to save it. If we make reasonable changes now, the program will be able to pay full benefits to the boomer generation and those that follow. Here are two examples that, combined, would get us well over half way toward solvency, and there are others to consider:

* Restoring the total wages taxed by Social Security to 90 percent of nationwide earnings--from $90,000 to $140,000 (perhaps phased in over a decade)--would lower the projected shortfall by some 43 percent.

* Diversifying Trust Fund investments to get a higher return could fix about 15 percent of the problem. Modest steps such as these are enough to strengthen Social Security for the long term. Once people understand this, and learn of the negative consequences of private accounts created out of Social Security--they overwhelmingly support making less severe changes in the program, and sooner rather than later.

AARP is not against all private accounts. We have long championed improvements in private savings vehicles like 401(k) plans and IRAs. But for a secure retirement, we need these savings in addition to Social Security, and definitely not at the program's expense.

By making sensible changes now, we can honor our obligations to all generations.

BY BILL NOVELLI

CDO of AARP
COPYRIGHT 2005 League of Women Voters
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Copyright 2005, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Title Annotation:SOUNDING OFF
Author:Novelli, Bill
Publication:National Voter
Geographic Code:1USA
Date:Jun 1, 2005
Words:450
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