Future Pensions at Risk

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Future Pensions at Risk

By Diane C. Lade, the Sun Sentinel

January 27, 2004

Today's college students, not today's senior citizens, are the ones who will be affected if the federal government allows part of workers' Social Security taxes to be invested in stocks and bonds.

That's why Rep. Clay Shaw, chairman of the House Subcommittee on Social Security, conducted a hearing Monday at Florida Atlantic University instead of on Capitol Hill.

But almost all of the two dozen spectators who came to listen were seniors, the kind who live in retirement communities, not taxpayers in their last year of college.

"I'm very, very concerned ... that every seat in this room isn't taken by young people. It's hard to get them whipped up about thinking about retirement," said Shaw, R-Fort Lauderdale, who laughed when someone suggested he try hosting a Social Security keg party.

Yet it's the graduating class of 2004 that will be approaching retirement in 2042, when reports suggest the Social Security Trust fund finally will collapse under the weight of the massive Baby Boom generation.

In 1955, there were eight workers paying into Social Security for every one retiree drawing out, Social Security Deputy Commissioner James Lockhart said at the hearing. Today, there are 3.3 workers for every retiree.

By 2018, trust fund expenditures will exceed taxes put in, Lockhart said, leaving Americans with three choices: pay more payroll taxes, take a reduced benefit or restructure the system. Absent any of the three, Social Security needs an extra $10.5 trillion to stay solvent, he said.

Under Shaw's proposal, workers would be allowed to move a percentage of their payroll contribution, probably between 2 percent and 4 percent, into one of several government-approved investments that would bring higher returns than the Treasury bills now used. If the taxpayer dies before retirement, the account reverts to his or her estate.

Student Michael Moore of Lighthouse Point, who just finished his term as FAU student-body governor, testified that he thought the retirement accounts, which would be voluntary, were a good alternative to regular payroll taxes.

"The fact that [the accounts] could be inheritable, offer substantially higher returns ... and the obvious benefits of compounded interest over years just makes it the right road to take," he said.

But Larry Winawer, whose Alliance of Retired Americans represents seniors who primarily were union workers, said Social Security as it stands now could be the only guaranteed benefit most Americans will have.

FAU business professor Joel T. Harper, one of Moore's instructors, said it's hard to get young people excited about Social Security. " ... A lot of them don't think it will be there for them anyway," he said.