For Baby Boomers, Just How Secure Is Social Security?

WHEN Dorcas Hardy refers to the Social Security system in the United States she calls it "social insecurity."

The former commissioner of Social Security has been traipsing around the country promoting her book, titled "Social Insecurity: The Crisis in America's Social Security System and How to Plan Now for Your Own Financial Survival" (Villard Books, New York). The theme of the book is that the system will be "in serious trouble soon after the start of the 21st century."

That's not what some other former Social Security commissioners say. They maintain people can count on getting their pensions.

Asked in an interview whether she was alarmist, a technique some writers use to sell financial books, Ms. Hardy replied: "No, I don't think so. Nor do I believe that I am saying anything different than when I was commissioner."

She wrote the book with her father, C. Colburn Hardy, who has written 27 books in the financial area.

Pressed a bit, Hardy admits that the system won't go bankrupt. "That's not true," she says. "The government will not break that contract entirely."

Nonetheless, she argues that between 2010 and 2020 when the baby-boom generation retires, the tax burden on the working generation will be such that benefits will have to be cut in some way. The age of retirement with full benefits will be advanced. Or the amount of payments will be reduced from the present level. Or Social Security taxes will be raised. Or taxes on Social Security benefits will be increased.

So, she advises baby boomers, "Go home and save and save and save."

That may be good advice, but not necessarily because the Social Security system is in grave danger. It is probably the most popular social measure in the country, and not just among pensioners. Any politician who seriously damages that system is not likely to survive at the polls.

Analysis of the soundness of the Social Security system depends not only on actuaries assessing the demographics; it hangs on economic assumptions. Will economic growth and productivity step up their pace in the next 20 years? If so, the working population will be better able to afford the taxes that pay for the pensions of the retired. In a populous world, will immigration increase, providing more workers to pay Social Security taxes? Will a greater or lesser proportion of women join the work force, pay ing taxes?

She writes: "The crisis is coming fast - in the lifetime of a few already retired and of almost all those now under age 55."

Maybe, but maybe not.

Hardy makes several recommendations for the Social Security system. One is to invest the current surplus in the Social Security fund for the benefit of future retirees. At present, the surplus is invested in government securities, helping to finance the budget deficit. She would like to employ the money to rebuild the nation's infrastructure - highways, bridges, water systems, etc. that pensioners use as well as others.

The former commissioner likes a proposal that the government should deposit 2 percent of an individual's Social Security tax payments into a personal pension plan. This would be partial privatization of the system.

Hardy also calls for an advance in the normal retirement age. The current schedule calls for that age to move from 65 at present to 67 by 2027. She suggests that happen in three or four years, and that it be moved to 70 by 2020. The minimum age for the early retirement option, now 62, should also be advanced rapidly, she says. And private savings and pensions should be encouraged.

Another suggestion is to eliminate the penalty facing retirees between the ages of 65 and 70 who earn too much.

"With the nation facing a labor shortage, nothing should be done to discourage older Americans from working," she maintains. In addition, an independent study - likely to become controversial - finds that the end of the penalty would produce more revenues for the government than its maintenance.

Hardy advocates that a national debate over the Social Security system should resume. It probably won't unless a funding crisis actually arises. But 70 percent of Americans pay more in Social Security taxes than they do in income taxes.