Social Security
Social Security is our most important and most successful program dealing with retirement security. Today its guaranteed benefits provide the primary source of income for 66% of Americans over age 65, and are especially important for the 42% of the elderly for whom Social Security is all that keeps them above the poverty line. It is also an important compact between generations and across divisions based on income levels. In short, the long-term financial stability of Social Security is important to every American, and not just senior citizens.
I strongly support maintaining adequate and appropriate guaranteed defined benefits for current Social Security recipients and for people who will retire in the future - but that does not mean that I oppose any changes in Social Security.
Recent Changes
I supported the successful effort to remove the earnings limit that could reduce Social Security payments to people retiring at age 65, which President Clinton signed into law in 2000.
I also voted for the “Social Security Protection Act of 2004,” which included provisions to protect beneficiaries against fraud or misuse of benefits by people or organizations handling beneficiaries’ financial affairs. That bill also made a number of other changes, including denial of benefits to people fleeing prosecution or confinement after conviction of a felony or who violate probation or parole under Federal or State law. It also prohibits payment of benefits to people removed from the United States for smuggling aliens.
Possible Future Changes
There are some other additional steps to improve Social Security that we should take right away. For example, we should end the so-called "windfall elimination" and government pension offsets that reduce social security benefits. And we should again allow blind individuals to earn up to the social security excess earnings threshold without losing benefits.
Further, as we look ahead, we must recognize that Social Security faces future demographic problems because retirement of the "baby boom" generation will greatly increase the number of beneficiaries in comparison with the number of people paying into the system.
Congress will have to address this, and should do so sooner rather than later. However, the excessive and poorly-targeted tax cuts enacted in recent years will make the job harder. Those tax cuts, pushed by the Bush administration and combined with a sluggish economy, have led the Administration to use some Social Security revenues for other purposes—including needed increases in spending on defense and homeland security— and to mask the size of the federal deficit. Consequently, our options for bolstering Social Security and Medicare have become more limited. I believe the Social Security Trust Fund should be protected against this abuse and we should insist on a bipartisan process to reform the budget and protect the solvency of Social Security for the future.
While I believe it is important to keep an open mind on all proposals to improve the long-term solvency of Social Security, I have serious concerns about proposals to allow people to divert part of their Social Security taxes into individual accounts that would be invested separately.
It is possible that such personal accounts could lead to higher payments after retirement. This is not guaranteed, however, and the full effect of would not be achieved until 2043 (when the first group of people who could have contributed throughout their entire career would become eligible for retirement benefits). This means that its effects would be different for people retiring in the future.
Those people fall into three large groups: 1) The baby boomers -- born in the 1946-1964 period; 2) The baby troughers -- born from the late 1960s to the late 1970s; and 3) The children of the baby boomers (the baby-boom echo) -- born in the late 1970s through the 1980s.
The baby boomers reach age 62 in the 2008-2026 period. Even under an optimistic investment scenario (a 10% rate of return), the oldest baby boomers would not have enough time to accumulate large personal accounts relative to their projected lifetime Social Security benefits. By 2030, “baby-trough” workers would have had more years to build personal accounts, and they could be more substantial, while accounts for “baby-boom echo” workers retiring in the 2043-2050 period could be worth still more even with modest investment success.
But as we consider possible changes, it is important to remember that Social Security’s purpose is not simply to provide annuities but also to insure society against wide-scale dependency among the aged.
The current system has a benefit formula favoring low-wage earners; it pays benefits to a worker's dependents with no corresponding increase in the worker's contributions; it shields beneficiaries from market risks and the risk of inflation; and workers' benefits are not strictly based on their own contributions but are defined in law.
Part of Social Security withholding pays for the advantages to society of giving a measure of economic independence to the elderly and a greater sense of economic security to workers. I think these are strengths that should be maintained.
Saving for Retirement and Pension Protection
Social Security is indispensable, but people will be better off if they can also have other sources of retirement income. So, we should make it easier for them to save and invest and accumulate assets. That is why I supported the Comprehensive Retirement Security and Pension Reform Act of 2001, and more recently, the Pension Protection Act of 2006 which requires that corporations keep their promise to fully fund their employees’ defined pension benefits. This historic act also increases the ability of younger workers to set aside income for retirement. We can build on this legislative success in several ways, including –
· Increasing the amount that individuals can put into Individual Retirement Accounts (IRAs) and benefit from favorable treatment under the tax laws.
· Enabling people to make additional contributions to 401(k) or similar retirement accounts, and making it easier to take full advantage of such retirement plans.
· Making it easier for people to maintain their retirement accounts when they change jobs.
· Making it more feasible for employers – especially small businesses – to establish and maintain retirement plans for their employees.