RE: New retirement accounts

[National Dialogue Moderator <moderator>]

I agree with Sam Beard, while independent savings accounts like President 
Clinton's proposed USA accounts may be an attractive way to improve 
national savings and create opportunities for lower-income Americans to 
save for their retirement, they do nothing to address the problems facing 
Social Security. 

I think it would be very difficult to use the existence of the accounts as 
an excuse to reduce Social Security benefits in the future if the accounts 
are not tied explicitly to Social Security when created. No one is arguing 
that the presence of IRAs and 401(k)s justify cutting Social Security 
benefits. And Social Security was never intended to be the sole source of 
retirement income. We want to encourage people to save additional amounts. 
It would send a preverse message to reduce Social Security benefits just 
because people had been prudent and saved for their own retirement.

Another concern with approaches that use budget surpluses to fund 
individual accounts that are in addition to existing Social Security 
benefits is that the government would be creating a new entitlement 
program, funded with budget surpluses that may, or may not, come to pass. 
Even if the current projections hold true, the budget surpluses disappear 
early in the next century. We would have to cut other government spending, 
increase taxes or borrow in order for the gov't to make its promised 
contributions.

A final concern is what effect these accounts will have on 
employer-sponsored retirement plans like 401(k)s. Will lower-paid people 
contribute to USA accounts instead of their 401(k)? If this happens, 
employers may have difficulty meeting the tax rules governing 401(k) plans 
and stop offering them. No one wants this result and the Administration is 
working with employers to make sure it doesn't occur -- but it is a 
concern. We need to strengthen all three legs of the retirement income 
security stool -- Social Security, employer-sponsored pensions, and 
individual savings.

Ann Combs
William M. Mercer