From: Richard Arsinow <richard.arsinow@rauland.com>
Subject: RE: Kilolo Kijakazi's responses
>>>>Social Security benefits are not and should not be transferable assets. The program is and should remain a social insurance program. There are some circumstances when all of the payroll taxes contributed by a worker are not received as benefits by the worker or spouse. There are many other instances, however, when the benefits received substantially exceed the payroll taxes contributed and also exceed what the worker would have received from a transferable asset. For example, the Social Security Administration estimates the value of survivors benefits paid to the family of a worker who dies at a young age is about $300,000. It is unlikely that a worker with average earnings could accumulate assets of this magnitude at an early age to leave for his family. In addition, many workers, especially low-wage workers, would not be able to afford a life insurance policy in the private market that provides this level of coverage.>>>>
Ms. Kijakazi, I must respectfully disagree with both the opening premise of this paragraph and the last sentence.
As you read the postings of participants in this forum and talk to workers who are in, or know of, families who have lost significant retirement benefits due to untimely death, you will begin to understand the widespread concern over this issue. Your argument 'Social Security benefits are not and should not be transferable assets.' will not get you very far with many people.
Social Security receives much deserved criticism because it tries, and fails, to fairly blend an insurance program and a retirement system. As an insurance program, it is too expensive. As a retirement system, it does not provide a fair return and it does not provide a consistent return to successive generations.
One of the positions reformers may take is that the insurance and retirement system functions ought to be separated. Then both functions, separately, can be improved. Many critics of Social Security as a retirement system do support its insurance aspects, and would continue to support the insurance monetarily, if the failed retirement system were separated and reformed. What they object to is that the bulk of the money is collected for retirement benefits, and those benefits provide an ever-decreasing rate of return on contributions. That return will soon go negative if no reform is implemented. This makes it less and less palatable to support the system as a whole.
Whether you choose to think of it this way or not, a great many workers think of their Social Security contributions as 'putting money away for retirement'. When a worker dies prematurely and his or her family cannot benefit from that 'money put away', how can you expect them to go on supporting such a system?
You put forth an example where you feel that the benefits received would substantially exceed either the payroll taxes contributed or the value of a transferable asset. This example highlights the need to separate insurance from building assets for retirement. Suppose the young man is in his 20s and is a nonsmoker in good health. If he had the freedom to do so, could he not take a small portion of the 10.4% of his pay to purchase a $300,000 term life insurance policy on the open market for around $200 per year, or even less? Could he not supplement this with a disability income replacement policy using another small portion? Finally, the remainder of the 10.4% could be invested tax-deferred for retirement, where he and his family could watch it grow. I submit to you that this young man would be much better covered both by insurance and for retirement than he is under Social Security. Why don't you want to let him have that choice?
