Monday, July 11, 2005

AARP Gulps

Don't sip that water! It may cost you your retirement. So says AARP President Marie Smith.

Smith picked up a bottle of Aquafina on Friday to show why President Bush's plan to allow younger workers to put part of their Social Security taxes into private investment accounts won't save the system.

She took a big sip.

"Behold, you have more water," she said, holding the bottle up before setting it down and adding, "Of course you don't. Give me a break."

Of course Smith is all wet with her metaphor, you are not consuming your Social Security when you "sip" it into an individual account. If anything, your are ladling it from the communal well into your very own bottle, thus ensuring that you can control it (maybe add some Koolaide too?)

Smith, according to the article, is no financial expert, so perhaps she does not understand how her metaphor is off:

Smith, who in 2004 was named by Ebony magazine as one of the 100 most influential African-Americans, has retired three times -- she worked for the Social Security Administration, she sold real estate in Hawaii, and she and her husband ran a tropical garden in Maui. She took on the AARP president's job, a volunteer position, in April 2004.

She also pushes the Dems idea that Social Security is insurance, not an investment. Yet, she does not explain (nor was she asked, it appears) why someone would buy an insurance policy that is priced to pretty much guaranty a loss even if it pays. Those losing situations are the classic ones to self insure.

Then she gave the students another scenario: Gates probably insures his home against fire and other disasters, she said. If his house burns down, should he be able to collect on the insurance?

"That's what Social Security is about," she said. "You paid for it. It's your insurance."

She also lays out AARPs needed elements to any reform:

It must be predictable and stable, with a risk-free retirement benefit.

It must offer disability and survivors' benefits.

Everyone, including police officers, firefighters and teachers, should participate in it.

It should provide adequate benefits for low-income retirees.

It should be fair.

Friday, July 08, 2005

Another example of Social Security Screwing the Young

This is a good example of the problems with the current Social Security (and tax) system. A 21-year-old university student who is losing more than a third of his less-than-hefty paycheck to taxes. If this is a weekly check he is earning only $20k or so a year ... so why is he paying so much in taxes?

Also interesting that he understands the importance of saving for retirement, and is doing so voluntarily. Still, nearly a third of his taxes fund Social Security. If he is in a situation like mine was, he is also paying for school by borrowing and taking grants. So, we take from his paycheck only to return the money with strings attached so he can attend school. Does not sound so moral to me.

Just wait until he graduates and he finds the taxman's take goes up.