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Social Security-Mend It, Don't End It
By Carmelita Tursi, Filipinas Magazine
January 31, 2005
My father died suddenly when he was 56, leaving a wife and two young teenagers. My mother had always been a stay-at-home-mom--busy raising children and acclimating to life in the United States since she'd come from the Philippines in 1948. My father did not want her to work outside of the home. When he died, my mother faced life not only without a spouse, but with responsibilities she could not fully comprehend. The social security system became very important to her.
With the repeal of the Asian Land Law in the mid 1950s, my father was able to buy a house for his family, so we had a place to live. My mother did not have a job, had never written a check to pay a bill, but like most immigrants, she was resourceful. She took on small part-time jobs like working in the kitchen at a senior care facility and shelling shrimp at Fisherman's Wharf.
My mother also cried every night for two years. When we asked her not to cry, she told us it was her way of grieving, she was sorry if her crying disturbed us but she had to do it. I did not realize how strong was the connection between my parents - almost 40 years later as she was going through some tests that showed she had experienced a series of mini-strokes that was causing her dementia, she said to me, "I wish your father was here." I said, "You have us." Her reply was "It's not the same."
At the time of my father's passing, I did not realize how important Social Security was to our livelihood, but I found out over the next 40 years. My father paid into the Social Security system as contributions deducted from his paycheck. My mother had made no contributions herself, but as a widow with dependent children, my mother received Social Security benefits for herself and for her children until we reached the age of 21.
Today, at 93, her sole source of income is Social Security. So now, as the debate over Social Security reform heats up, I know from my family's own experience the importance of Social Security--especially to women.
Women rely heavily on Social Security. Women constitute the majority of Social Security beneficiaries, representing almost 60 percent of all Social Security recipients age 65 and older. Women are
* over two-fifths of the beneficiaries of disable worker benefits,
* 99 percent of the spouses receiving Social Security
benefits,
* 99 percent of the nondisabled surviving beneficiaries, and
* 98 percent of the dually entitled, that is people entitled to benefits as retiree workers and as spouses.
Widowed, divorced, and never-married women, in particular, depend heavily on Social Security. Social Security accounts for half or more of the income of nearly three-fourths of nonmarried female recipients of Social Security. For one in four, it is the only source of income.
Social Security keeps women age 65 and older out of poverty. Social Security is the mainstay of retirement-income support for millions of older women and has kept significant numbers of women out of poverty. The poverty rate for women would be significantly higher without Social Security, increasing form 12.4 percent to over 50 percent.
Social Security is gender-neutral. By law, the Social Security Administration cannot take gender into consideration when calculating benefits, so women and men with identical work histories and earnings receive identical benefits. However, women typically live longer than men and thus receive benefits for a longer period of time. At age 65, for example, women can expect to live another 19.2 years, compared to 16.3 years for men.
Because the private market can consider gender when calculating annuities, the same accumulation of savings in individual accounts would purchase lower monthly benefits for women than for men, even though payments over a lifetime may be the same.
Social Security's spousal and survivor benefits are especially important to women. Sixty-two percent of female beneficiaries age 62 and older receive Social Security benefits as spouses or surviving widows based on the earnings records of their husbands (34 percent) or as dually entitled beneficiaries (28 percent). Dually entitled beneficiaries qualify for their own retired worker benefit but can opt instead for benefits based on the earning history of their spouse--they are entitled to receive the higher of the two benefits.
Wives as well as divorced women who had been married to their ex-husbands for at least ten years are entitled to spousal benefits amounting to 50 percent of the benefits of their husbands or ex-husbands. Upon widowhood, they are automatically eligible for a benefit amounting to 100 percent of their current or former husband's benefit.
Social Security provides inflation-protected, lifetime benefits with no market risk. Annual cost-of-living adjustments ensure that Social Security benefits retain their purchasing power. The value of most other sources of retirement income, such as private pensions and annuities, erodes over time.
In addition, Social Security is guaranteed for life. Women do not have to worry about outliving their Social Security benefits. They do not have to worry about market fluctuations when it comes to their Social Security benefits. These aspects of Social Security are very important to women because women have longer life expectancies than men, tend to be more conservative investors, and generally have less income to risk. Individual accounts would not provide the same protections.
The current Social Security system needs to be strengthened. As the boomer generation begins to retire, more people will be getting benefits relative to the number of people paying into the system. In addition, people are living longer. These are reasons why we need to make changes.
Social Security is in no immediate danger of going "broke," as we have been led to believe. Without any changes, the Social Security actuaries report that the program can pay 100 percent of benefits through 2042 and over 70 percent of promised benefits after that. However, paying only 70 percent of promised benefits is not acceptable.
Some steps can be taken to begin making a down payment on that future Social Security shortfall. AARP supports:
* Investing part of the Social Security surplus so that it earns higher returns than those offered by U.S. Treasury bonds. That way we strengthen Social Security while sharing the risks of investing. We should not be creating a system where some people win and others lose when it comes to Social Security.
* Raising the cap on the amount of wages taxed to support Social Security to cover the same share of wages as in the past. That would gradually raise today's cap of $88,000 to approximately $140,000.
* Making Social Security a truly universal system by including all newly hired state and local government workers in Social Security. These steps alone won't fill the entire future gap, but they are substantial steps toward solving the problem.
Some people have recommended taking part of the money we pay into the system and diverting it into newly created private accounts. Because less money would be flowing into Social Security, the guaranteed and inflation-adjusted lifetime benefits would have to be cut.
Maybe the investments in the account would make up the difference, and maybe they wouldn't. Estimates are that a two percent private account carve-out would create a shortfall of over a trillion dollars. That amount would eventually have to be covered by raising taxes, cutting benefits, and/or taking on new debt. In addition, private accounts introduce risk into essential retirement security as stock and bond markets rise and fall.
Even facts can be confusing. I often wonder, as a Filipino American woman who considers herself to be pretty well informed, how I would handle personal investments if part of our earnings are privatized. For Filipinas who are brilliant money managers, there is the option of private savings that are in addition to Social Security, not at the program's expense.
The essence of Social Security is that it assures a predictable measure of retirement income.
I wonder how many of our middle-aged and elder Filipino American women have the necessary skills to manage their own retirement plans or would they leave this task to their spouse or older children? How much education would it take for many immigrant as well as native-born Filipinas to manage private accounts? What would my mother have done? Could she have adequately supported us on a lower Social Security benefit?
I do know that the debate about Social Security reform will be with us for some time and we must be well informed about decisions that could affect our retirement security. The system is not broke and with a few modest fixes, our children and grandchildren can be protected by the same safety net that preserved my family--they deserve no less.
Carmelita Tursi is an Associate State Director, AARP California. Facts for this article were taken from AARP's Public Policy Institute's publication on Social Security and Women: Some Facts, written by Sara E. Rix and Laurel Beedon. AARP's website http://www.aarp.org.
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