Archive for the Social Security Category

In a few weeks, on December 15th, a little known but important document will be released: the annual Financial Report of the U.S. Government. Just like publicly traded corporations, the U.S. Government is audited, and the results are made public. They’re even signed by the Secretary of the Treasury.

You’ve probably never heard of the audit report and may be wondering why. It’s not an accident.
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The presidential election isn't the only election that will take place on Tuesday.

House and Senate races can be even more important when it comes to the critical issues that will shape future retirees' lives.
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AAFR has repeatedly warned against Social Security "privatization" schemes, which are usually floated by Republicans. But some Democrats, too, want to get their hands on future retirees' money. How? By taxing, confiscating, or otherwise monkeying with the trillions of dollars currently invested in 401(k) plans.
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By now, the fact that the recent stock market volatility is wreaking havoc with 401(k) plans is old news. But the drop in asset values isn’t the only thing plaguing the popular accounts.

According to a recent Wall Street Journal article,

• Many investors in the pre-retirement phase have far too much of their nest eggs invested in stocks. This means that if a downturn hits, they may suffer large losses with little or no time to recoup them.
• Companies have increasingly been pushing so-called “target date” funds as a simple solution to the asset allocation problem. But these funds have recently been performing poorly.
• Downturns scare many workers into dialing back or eliminating contributions to their 401(k)s. This means that they may miss out on the very buying opportunities that could help them recover from losses more quickly.
• Employers sometimes reduce or eliminate their “match” or contribution during difficult times.

The last possibility is particularly worrisome, since it entails, essentially, robbing employees of their safety nets just when they’re teetering on the tightrope.

At AAFR, we believe that the inherent risks in 401(k)s do not in and of themselves make them bad investment vehicles, but rather, that 401(k)s should only be depended upon for supplemental income. Workers should be able to depend on Social Security for basic income regardless of market conditions. This is why we stand in particularly strong opposition to Social Security privatization.

The ongoing stock market crash has wiped out literally trillions of dollars of wealth. Few Americans, from the richest to the poorest, have escaped unscathed.

Perhaps the most heartbreaking losses are being suffered by retirees and pre-retirees. Millions people in, or on the brink of, their golden years, have suddenly found themselves much poorer than they imagined. Some have had to postpone retirement. Others, already in it, have been forced to drastically reduce their standards of living.

Their suffering provides a graphic reminder of the importance of preserving Social Security as it exists today: as a defined-benefit, not a defined-contribution plan. Yet so-called "privatization" proposals would invariably do just that.
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