Counting (on) Your Nest Egg

The Social Security Administration has launched a new effort to inform each working American of the amount of retirement supplement that he or she may receive upon retirement. That's both good news and bad.

Good news, because it may alert younger adults to the need to begin immediately to save and plan for retirement. Social Security is not a pension plan; it's not nearly enough to live on comfortably.

Bad news, because much of the information that working taxpayers receive will be just an estimate that may prove way high or way low. When you're a twenty- or thirtysomething, officials can't estimate what you'll earn during your peak years. And of course your total contributions determine what benefits you'll receive in retirement. So you'll need to carefully review your yearly update or visit the agency's web site ( to recompute your estimated benefits, since as your earnings change, so will your Social Security benefits.

Bad news also, because many may misinterpret the statements as a guarantee that the money will be there when they retire - and without change in the present system, it may not be.

Social Security payments to retirees are funded by taxes collected from current workers. Right now Social Security takes in more than it pays out; the surplus for years has been borrowed by the government for other programs. But around 2014, after baby boomers have begun to retire, the system will start running deficits. By 2034, if no changes are made, Social Security will be bankrupt.

In 1950, 16 workers paid into Social Security for every retiree drawing benefits. That ratio has fallen to a bit more than 3 to 1 today. By the time the system runs out of money, it will drop to 2 to 1, or perhaps even less.

There are many proposals to reform Social Security, all of them controversial. We favor a plan under which workers could invest a percentage of their payroll taxes in personal retirement accounts managed by themselves, not the government. Other ideas include combinations of reducing benefits, raising the retirement age, or increasing payroll taxes.

The current debate over "raiding" the Social Security trust fund has little to do with the long-term problem, despite rhetoric from both parties. Social Security's problems go far deeper.

If the newly available benefit statements awaken Americans to the need to reform Social Security now, when it will be less painful, that would be the best news of all.

(c) Copyright 1999. The Christian Science Publishing Society

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