Under President Bush’s proposal, a certain amount of payroll taxes would be diverted to private accounts that could be invested in private stocks and bonds. The AARP has come out against the idea, stating that it favors incentives to supplement Social Security benefits with individual accounts such as 401(k)s and favors diverting payroll taxes into individual accounts.
“Market returns can be attractive, yet they come at a risk. Private accounts can lose money just as fast as they can make it,” a statement posted on the AARP Web site asserted. “And, unlike Social Security, you run the risk of outliving your savings and you lose the protection against inflation.”
Instead of diverting payroll taxes, the AARP favors incentives to increase supplemental programs. “AARP opposes private accounts that are financed out of the Social Security payroll contribution,” the Web site statement continued. “Private retirement accounts in addition to Social Security, in contrast, are an essential part of personal retirement security.”
According to the statement, the group offers three specific proposals:
- investing part of the Social Security surplus so that it earns higher returns than those offered by US Treasury bonds.
- raising the cap on the amount of wages taxed to support Social Security to cover the same share of wages as in the past. That would gradually raise today’s cap of $88,000 to approximately $140,000.
- include all newly hired state and local government workers in Social Security.
“It is true that Social Security needs modest changes, but the guarantee it provides is one worth strengthening, not replacing,” the organization said.
More information about the AARP’s position on social security is at www.aarp.org/socialsecurity .
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