Social Security privatization to hurt Hispanics and African Americans

Privatization of social security will have disproportionate impact and one of the concerns is that it will harm low-income Americans. According to the 2000 Census, over 2 million African American seniors get Social Security benefits and nearly one-fifth of all African Americans who receive Social Security benefits are children. For 41 percent of elderly Hispanics, Social Security is their only source of retirement income.

Congresswoman Tubbs Jones is a member of the Social Security subcommittee of the Ways and Means Committee. She is very concerned about President Bush's plan for privatization of social security. She thinks that the plan is detrimental to the retirement nest eggs of Americans.

"Social Security was designed as a social program not a private investment program. Most people think of Social Security as retirement benefit program for people as they grow older and can no longer compete in the labor market. However, Social Security does much more than that, most notably providing benefits to many disabled workers, as well as minor children of deceased parents,” she says.

She adds, "The truth is that Social Security will be fully solvent for the next forty to fifty years, and even after that it will to continue to be able to pay 80 percent of benefits. In fact, the tax cuts President Bush gave away to the wealthiest one percent of Americans could have covered the amount of the long-term Social Security shortfall and there would have still been money left over for other important priorities. It is for these reasons and many others that I, along with my Democratic colleagues, believe that long-term balance for Social Security can be achieved through modest revenue and benefit adjustments that will begin to reduce the deficit within the next 10 years. Additionally we need to secure pension benefits, and make it easier for workers to save for retirement by enhancing and strengthening investment vehicles like 401(k)s and IRA plans, and provide clear information on retirement investment options." (Related article: Bush's plan for privatization of social security)

There is similar opposition to the privatization of social security in other segments. In fact, many experts believe that the privatization may simply not happen. Many experts argue that politicians often pick issues that they know they can do nothing about (for instance, amending the constitution to deny gay Americans the right to get married), but want to energize their base. Since Bush got elected on this platform and contributors who have donated millions of dollars to his campaigns are now pushing him hard to talk about, he is doing it but the issue might simply die in a couple of months. It will then give Bush a chance to make this a signature issue in the 2006 mid-term election. (Related article: Why is Bush pushing for privatization of Social Security?)

While lawmakers debate the potential impact of private, self-directed Social Security accounts, most retirement plan experts (64%) do not believe it will actually happen by the end of the decade, according to Prescience: Expert Opinions on the Future of Retirement Plans, a just-released modified Delphi study conducted by Diversified Investment Advisors. Diversified conducted the study to provide insights on the retirement industry's future to executives responsible for retirement plan management to enable them to develop and evaluate strategic direction.

Overall, the study's panel of experts foresee some changes in retirement plan regulation and taxation, but none that will affect the fundamental framework of the business. For example, 63% of the experts agreed that legislation to create individually managed after-tax retirement savings accounts will pass and change the dynamics of the retirement plans market. However, 87% of the experts also agreed contributions to retirement plans will remain free of income tax.

"Regardless of the outcomes of the debates and proposed reform around retirement plans, the retirement plan industry is expected to grow substantially during the second half of the decade," explained Eric Henon, a vice president of Diversified Investment Advisors. "Most panelists expect that retirement plan assets will grow from $11 trillion today to between $15 trillion and $19 trillion by 2010."

"This industry expansion is being fueled by many factors: the sheer number of baby boomers currently in their peak earning years; a more acute awareness of the need to save for retirement and such factors as 'catch-up' contributions, for example. The debate alone about the fate of Social Security is causing more people to be proactive about their retirement savings," Henon added.

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