Is social security hazardous to your savings?

Does the social security system harm the economy?

Martin Feldstein, incoming chairman of the Council of Economic Advisers, has long argued that social security discourages US workers from saving for their old age, thus shrinking the pool of capital available for business investment in new plants and equipment.

Others dispute that theory. Now Henry Aaron of the Brookings Institution, in a study presented at the Aug. 19 meeting of the National Commission on Social Security (NCSS), says there is no evidence that the retirement system sucks funds away from private saving.

''We shouldn't base changes in social security on supposed economic effects, '' says Dr. Aaron. ''There are enough other important factors to consider.''

Something must be done soon to fix social security.

The recently passed tax bill provides some help. By requiring federal employees to pay the 1.3 percent medicare share of the social security tax, and by capping some medicare payments, the new legislation contributes about $16 billion to ease social security's cash flow crunch.

But social security will need $14 billion in further relief to keep checks rolling out on time through 1985, Congressional Budget Office director Alice Rivlin told the NCSS on Aug. 19. Without quick action, the system's old-age trust fund will founder sometime in the middle of next year.

Members of Congress and the administration, when asked what they will do to solve the problem, invariably reply that they are ''waiting for the commission.'' The national commission, formed by President Reagan last year, must deliver its recommendations by Jan. 1, 1983.

Any package of proposed changes must take many factors into account: a booming number of retirees, a declining number of workers paying into the system , recent fast growth in benefits, inflation, and an already-growing social security tax burden. The effect of social security on the economy as a whole must also be considered, if the total impact of any changes is to be adequately judged.

In 1974, a controversial study by Dr. Feldstein held that workers, confident their future economic needs would be taken care of by social security, were socking away less cash for their old age. Less money was flowing into the US pool of personal saving, so less money was available in the large chunks needed for investment in new plant and equipment.

Though technical aspects of the study have been picked apart over the intervening years, Feldstein - soon to be Reagan's chief economic adviser - still stands by his basic conclusion.

''The current level of social security benefits substantially depresses private savings,'' Dr. Feldstein wrote recently.

But Aaron says social security doesn't affect US saving. Feldstein's implicit conclusion - that social security benefits distort the economy - has no statistical support, says Aaron.

''Since World War II, there has been almost no tendency for saving to rise or to fall in the US,'' writes Aaron.

Both personal and total savings (personal, corporate, and government savings combined) have fluctuated over the past four decades, says Aaron, but the movement has been random noise around a stable baseline.

''In my judgment, the evidence falls grossly short of establishing the size, or even the direction, of the effects of social security on capital formation,'' says Aaron.

Aaron also examined the effect of social security on the US labor supply. The percentage of elderly males at work has declined steadily throughout the 20th century, a trend social security has helped along by ''a small amount,'' according to Aaron. Rising incomes also played a strong part in pushing more males into earlier retirement, according to the study.

Reversing this trend and keeping elderly male workers on the job could help ease social security's cash flow crunch. One approach would be changes in the system itself: gradually raising the retirement age to 68, or eliminating the income test for retirees. Aaron also suggests changing private pension regulations (requiring employers to sweeten the pot for those who postpone retirement, for example) or altering laws governing tax-sheltered savings plans such as independent retirement accounts and Keogh plans.