Tuesday, June 28, 2005

SSI - Social Security Insurance Rhetoric

A few years ago, as Business Director of a not-for-profit arts organization, I was working to establish a retirement program for employees. I think helping employees save for retirement is one of the best benefits an employer can offer. It gives the employee some security, it helps attract well qualified employees and it reduces employee turnover. One member of the Board of Trustees preferred a cafeteria style benefit plan because he thought requiring employees to save for retirement in order to receive the matching money the employer offers was paternalistic.

The current rhetoric in the Social Security debate equally baffling. Is the current SSI tax, matched by the employer, paternalistic? Maybe. Is that bad? Note that it's SSI - Social Security Insurance. It's not retirement savings. It provides workers with an annuity type investment to fund retirement. If you retire early and live a long time, you get more than you paid in. If not, well then, aside from survivor benefits, you're funding someone else's retirement. Maybe that's the part conservatives can't stand.

We're simply not going to let people starve when age or disability forces them to retire. SSI prevents the need to support, outright, people with no other retirement savings (or inadequate savings). And, incidentally, everyone else benefits, too. Would we prefer a tax to support only the people who have no other retirement savings?

I'm absolutely in favor of private retirement savings and investments. I have some myself. Every one is free now to establish whatever private savings plan they want. Some plans are nicely encouraged by tax exemptions and credits. We don't need the government to require private savings. It's enough that there are some tax benefits. What SSI provides is a bit of insurance for people who haven't had enough money or foresight to save enough for retirement.

I know I have neighbors who don't have enough money to save for retirement. I also have friends with incomes considerably higher than mine who've been living in the moment and have saved little or nothing for retirement. I'm okay with that. Let me repeat: it's Social Security Insurance. I'm required to carry liability insurance on my car. In addition, I opt to pay for collision coverage to cover the expense of repairing my car in the event of an accident. So, for thirty five years I've paid hundreds of dollars a year for car insurance. I've never had an accident. Someone out there is paying for their accidents with my money. Likewise, if I live a long time (which I may, given the fact that I've never had an auto accident) I'll be getting someone else's money in my Social Security check.

Consider that other great misnomer, Life Insurance. It has that warm, fuzzy, safe feeling. But it's a bet with the insurance company. You're betting that you'll die before you pay in the value of the policy. The insurance company is betting you'll live a long time and pay in more than the value of the policy. Let me clue you in. The insurance company, just like the Las Vegas dealer, is going to win. They're not doing this for the fun of it. They're making a profit. If I had life insurance I'd be counting on all those people who live a long time and keep paying their life insurance to give my beneficiary a chunk of money when I die.

Hmmm... I wonder how many conservatives have annuity investments or life insurance.

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