Stockbroker disses Santorum SocSec Town Hall (Letter to Editor)

http://www.post-gazette.com/pg/05062/465375.stm

murky plan
I went to see Sen. Rick Santorum at the student union at Duquesne University last week ("Looking for Support: Santorum Finds Many Minds Made Up on Social Security," Feb. 22). I had not heard the president's plan for Social Security yet and thought the senator could shed some light on it. If that was the plan, it desperately needs reworking.

The senator used charts for the future projections that were pure guesswork. He did not use the charts that his own Congressional Budget Office, which employs real actuaries, has drawn up. They project that Social Security will not reach shortfall until 2052, not the 2042 the senator assures is the real date.

Then he tried to make us believe that we would own our accounts, which would be converted to annuities at age 65. Until age 65 sounded good if our investments did well. At that point the annuity would kick in. What the senator did not seem to know was how annuities work.

He said we would all buy an annuity from an insurance company at age 65. Annuities have seven options. The highest payout is the lifetime annuity. He was saying we would take the joint and survivor option. With neither of these options do we own that money. The lifetime contract reads that you will receive income until you die, no matter how long you live. If you live to be 100, you win. But if you live only another month, or just one day, the insurance company keeps the rest. The same thing happens with the joint and survivor option, except you get a smaller payout, and when the second of you dies, the insurance company keeps the rest. Where is the ownership in the scenario?

Also his ideas of where we would get the dollars to fund the privatization scheme were fuzzy to say the least. The president's plan as introduced by Sen. Santorum definitely needs help.


BARBARA DICKMAN
Delmont

Editor's note: The writer is a stockbroker.

I thoroughly enjoyed reading that, and if Bush could read, I'd recommend this education LTTE.

I'm booking this one... thanks

when they get pinned down on the details it turns out that the "ownership" provided by the current version of private accounts is not the same "ownership" people who have IRAs, SEPs, or 401Ks are familiar with.

"Ownership" is definitely an inaccurate term here. A more appropriate term would be "transferability," and the "transferability" of the proposed private accounts is severely limited because of the annuity requirement. And, as the LTTE writer points out, it is also linked to the timing of the account holder's death.

And the tradeoff for this severely limited "transferability" is reduced benefits, the extent of which remains to be determined.

And, of course, all this carving out and juggling and annuitizing does absolutely nothing to solve any underlying structural problems with the Social Security Trust Fund....

In short, as with so many Bush Administration schemes, it's all just wasted time and effort.