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Seniors challenge need to reform Social Security

March 30, 2005|by DON AINES

chambersburg@herald-mail.com

CHAMBERSBURG, Pa. - President Bush has said his proposal to reform Social Security will not affect the benefits of those 55 and older, but the administration's plan drew criticism from many of the senior citizens who met with U.S. Rep. Bill Shuster Tuesday at Menno Haven.

About two dozen senior citizens attended the forum, several of whom spoke out against making drastic changes in the system.

"We will not see a dip until 35 years from now ... It's a concern, not a crisis," said 91-year-old Gilbert Steil. He said a number of problems are more immediate, including the Medicare prescription drug plan, homelessness and hunger.

"I believe there is a problem and it's something we need to address sooner than later," said Shuster, R-Pa. Fixing Social Security could cost $2 trillion if done now, but $10 trillion or more if delayed for several years, he said.

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The amount of money being paid out of the Social Security Trust Fund will exceed the amount coming in by 2018 and the system will be insolvent by 2042, Shuster said. At that point, he said, the system will have to cut benefits 27 percent.

The options are to raise Social Security taxes, now at 12.4 percent; cut benefits and raise the retirement age; or reform the system as proposed by the president, whose plan includes private retirement accounts, or PRAs.

With PRAs, workers could choose to invest a portion of their payroll taxes in approved accounts managed by the Social Security Administration. The returns on those investments are likely to be higher than the 1 percent or 2 percent realized by Social Security, Shuster said.

The returns from PRAs would partially offset cuts in regular Social Security benefits in the future, he said. The PRAs also would be part of an individual's estate and transferable to survivors upon death.

The returns on PRAs could range from 3 percent to 10 percent a year, "depending on what's happening in the economy," Shuster said.

"We have no guarantee where the market is going to be in 10 years," said Dr. A. Gruen, 85. "Past performance is no guarantee of future returns," he said, echoing the warning included in many investment plans.

"If there are other options, let's stop looking at putting money in private markets," Gruen said. Asked later how he had fared in the stock market, Gruen said, "OK."

Gruen and Steil both said the government could save money by ending the war in Iraq.

One woman, who declined to give her name, said the government should remove the $90,000 cap on payroll deductions.

Shuster said raising taxes is not his first option and taxing incomes above $90,000 would only keep the system in the black for another six years. That could, however, be part of any package that Congress eventually acts on, he said.

"Everything is on the table, but the Democrats haven't come to the table yet," he said. Shuster offered no prediction on when a bill might come before the House or Senate.

"What we've got to be looking at is the 25- or 30-year-old" whose retirement is far into the future, Shuster said. In 1937 there were 60 workers supporting each Social Security beneficiary, a ratio that has fallen to 3.3 to 1 as the population ages, people live longer and collect more benefits.

Shuster said many younger people he has met with are enthusiastic about PRAs.

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