AARP Bulletin - November 2011

Test Your Smarts

1. How many people
currently receive Social
Security benefits?
A. 14 million
B. 55 million
C. 121 million

2. What is “full (normal)
retirement age”—the
age you can receive ben-
efits with no penalty?
A. 66
B. 67
C. 68

3. What’s generally the earliest age you can get retirement benefits A. 62 B. 64 C. 66

4. What’s the basis for
calculating benefits?
A. Your total assets
B. Your final annual pay
C. Your top 35 years of pay

for Pinnacle Advisory Group, and the money might last only 30 years. How many average earners are likely to save that much?

Myth #3: In 1983, Congress made changes to Social Security to build a fund that would pay for boomers when they retire, so it’s not fair to change benefits now. No, Congress did not intend to “advance fund” the boomers, according to a study of the record by Charles Bla-hous of Stanford University’s Hoover Institution. It raised taxes and cut some future benefits to cure an imminent insolvency. The trust fund reserves—now $2.6 trillion—were a by-product of the decisions made. Congress never veered from its vision of intergenerational compact: Working people pay for those who don’t, or can’t, work anymore. On the flip side, the compact requires older people to make some concessions so that younger people can afford it.

Myth #4: You should get out of Social Security the amount you put in. No. Social Security is not an individual investment program (see Myth #2). Your taxes paid for the earlier generation of retirees. Current workers are paying for you. The total amount of your benefit depends on how much you earned, whether you get a spousal benefit, when you retire and how long you live.

5. In most cases, how
long do you need to
work to earn retirement
benefits?
A. 5 years
B. 10 years
C. 35 years

“Nothing can compensate for life without your father, but Social Security sustained us.”

6. Members of Congress pay into Social Security. A. True B. False

Answers: 1. B. 2. A or B.
It’s 66 for people born
1943-54. It rises gradually,
reaching 67 for people
born in 1960 or later.
3. A. But the amount is
less than it would be at
full retirement age. 4. C.
5. B. 6. A. Congress and
its staffs joined the Social
Security system in 1984.

; Cindy Sturgeon,
50, Louisiana I am
one of seven children. Our
father died when we were
between the ages of 4 and
12. Benefits to our mother
started at $232 a month
in 1966. Insurance covered
our home and vehicle, so
we survived. We lived off
our acre of land, raising
chickens, milk cows, pigs
and vegetables. That, and
Social Security, sustained
us. I became a registered
nurse. We contribute to
Social Security, and it’s
comforting to know that
if my husband were to
pass away before my son
finished high school, we
too would benefit from it.
We are the generation that
has lost millions to stock
market crashes, and the
cost of living keeps going
up. My prayer is that Social
Security will continue to
provide the assistance it
was created to provide.

Myth #5: Social Security helps old people, not younger people like me. Wrong. It provides income support to qualified widows and widowers with young children, as well as orphans. Just as important, it saves young families from the cost of supporting older parents who, without Social Security, wouldn’t have enough money to live on. It also provides benefits for workers who become disabled.

My final point … and it isn’t a myth, it’s a fact. If young people switched their payroll taxes into private accounts, the government would have to borrow $6.5 trillion or more (depending on the details) to keep paying out benefits to current retirees.

That means higher deficits, higher income taxes, further slashes in spending, or all three. It’s smarter—and cheaper—to fix the current program and put everyone’s mind at rest. ;