The Big Gap in Social Security Privatization
January 8, 2005
By Mary Pitt
is at least one little "chink" in the plan of the Bush administration
to "privatize" Social Security that does not appear immediately
and may not sound terribly important to those who are young, able-bodied,
and absolutely convinced of their indestructibility and their prospects
of growing very rich before becoming old and ill. However, the parents
of these young Titans should inform them of these caveats before
they cast their support behind the plan.
It is a fact of life that anybody, at any age, may fall victim
to an accident or a debilitating disease unexpectedly. Under the
current Social Security system, in such an event, the workers may,
upon becoming permanently disabled and regardless of any applicable
insurance coverage, begin to draw full disability payments that
will continue for the rest of their lives, with payments also being
added for support of spouse and/or minor children. It is a given
that, in the event of "privatization," these benefits will continue
at a reduced rate. Since the current payments are barely sufficient
to meet most of the essential expenses of remaining alive, still
less will be received and the result will be unmitigated poverty
for the family.
But, you will have "all that money" that you have had invested
in the stock market, you say? Once that precious stock is "cashed
out," it will be eligible for garnishment for medical bills or other
indebtedness as soon as it hits your bank account. In addition,
you will be ineligible for any medical assistance until every penny
of that money has been spent for "legitimate purposes," according
to Medicaid requirements. This will not be difficult since you will
not be eligible for Medicare until the permanency of your disability
is firmly established. And, most importantly, once that money is
received and spent it is gone. There will be no more "growth," no
more dividends or interest. It will be gone.
In the event of a premature death, with surviving spouse and minor
children, the results will be even more traumatic. The proceeds
of the "private account" will be required to pay for funeral and
"final expenses," leaving only the pittance from Social Security
to support the kids. Since it is only a survival stipend now, they
will find that it is considerably less under the proposed regulations,
possibly requiring the sale of home and car and recourse to the
welfare system to provide food, lodging, and education. Forget higher
education for the kids unless they are very ambitious and find themselves
able to work to survive and pay their own books, tuition, and living
costs. Since Social Security for dependent children stops on their
nineteenth birthday, they may have to pay their own graduation expenses.
By the way, as the kids grow, your wife will have to work to support
herself since she will not be eligible for "widow's pension" until
she, herself, reaches retirement age.
Nobody who is in the prime of life, whose career is on an upward
path, and who fully expects to build themselves a rich, full life
wants to consider the possibility of a disabling accident or a premature
death, but the fact is that these things happen every day, and even
insurance is not a sufficient solution to all the problems involved
when they do. We all would be thrilled to own a "piece" of the booming
stock market which is painted as the road to riches, and it may
well be just that. However we have recently seen a stock market
debacle where fortunes were lost by people who were sure that they
were going to have a serene retirement due to their investment via
401K's and company pension plans. Today's Social Security can become
very important under those circumstances.
If you make enough money now to save and invest in the stock market,
by all means, do it. You may make all your dreams come true. But,
in the event things do not go as you planned, good old Social Security,
as it is today, may become a lifesaver for you and your family.
Social Security was not begun to make sure that everyone gets rich,
and it certainly does not, even though many who are rich benefit
by it. But, when disaster falls and the need is great, without its
safety net it will be a long way down.
Mary Pitt is a septuagenarian Kansan who is self-employed and active
in the political arena. Her concerns are her four-generation family
and the continuance of the United States as a democracy with a government
"of the people, by the people, and for the people." Comments and
criticism may be addressed to email@example.com.