By John Rother, executive vice president for policy and strategy at AARP.
On Saturday, we marked the diamond anniversary of a national treasure - Social Security, signed into law on August 14, 1935. With his signature, President Roosevelt began what has become the bedrock of economic security for countless working Americans and their families. In addition to providing retirement benefits for those age 62 and older, Social Security provides benefits that help all generations. Families of soldiers killed in Iraq and Afghanistan, children who lose a working parent, workers who become disabled, widows and widowers - all count on Social Security benefits. In all, 53 million Americans today count on Social Security as a critical source of income.
It's a time to celebrate Social Security's remarkable past success, and to commit to ensuring our nation's most important program will be strong in the future. It's also a time to counter false assumptions that give rise to so-called "solutions" that instead of strengthening the program, will undermine the retirement security of our children and grandchildren.
The fact is, Social Security will be as important for future generations as it is for current retirees. In the recession millions of Americans lost their jobs and their pensions and saw their private savings accounts plummet with the fall of the stock market, but Social Security benefits were there, as they have been for 75 years, in good times and bad.
For the majority of retirees, Social Security can be the difference between aging with independence and aging in financial desperation. To be specific, Social Security provides more than half the income for 72 percent of single individuals age 65+ who receive Social Security benefits and for 52 percent of couples who receive benefits.
And, yet, as vital as these benefits are, they are modest by any standard. Social Security was never designed to be a worker's sole source of retirement income. Today's average workers' benefits will replace only about $4 of every $10 earned while working. The average retirement benefit in December 2009 was $1,168 per month - about $14,000 a year. For retired women, even less - only $983 a month -- or less than $12,000 a year.
Even so, it's become conventional wisdom for young people - and many older folks as well -- to assume the program won't be around when they need it. Only one in three 18- to 29-year-olds in a recent AARP survey said they were "very" or "somewhat" confident of the future of Social Security. This is not surprising when you have alarmists running around saying the program is about to go broke. Yet, even though younger Americans lack confidence in Social Security being there for them, more than nine in ten want to know it is there when they retire just in case they need it.
What alarmists won't tell you is that Social Security is stronger than most people believe. Even if Congress does absolutely nothing, Social Security can pay full benefits until 2037 and 78 percent of benefits for decades after that. And, the Social Security Trust Funds have assets of about $2.5 trillion, and it's still growing.
Paying 78 percent of benefits isn't good enough, however, so we know we need to make changes to Social Security over the long-term so that it will be able to continue to pay promised benefits to future generations. The changes do not have to be drastic, but the sooner we act, the better. By making a few changes to Social Security now, we can keep it strong for our children and grandchildren.
Unfortunately, some in Washington are proposing cutting Social Security benefits to reduce the deficit. Yes, our nation's leaders need to find ways to reduce the deficit, but Social Security has played no role in our current deficit situation. There are several ways to strengthen the program's long term finances through modest adjustments that can be phased in over many years.
Social Security, by law, is separate from the rest of the federal budget. It is self-financed, and cannot legally spend more than it collects through payroll taxes, the taxation of benefits, and the assets in the Trust Fund. In fact, for years, Social Security's surpluses have masked the true size of the deficit in the rest of the federal budget.
We need a national discussion on how to restore retirement security for all Americans. Old-fashioned as it might sound, that dialogue should be bipartisan. It should include strategies to promote more saving in addition to Social Security, such as through incentives to save in the workplace, especially where employers do not offer pensions, or 401(k)-type savings plans. We need real leadership in Congress to address these issues in ways that support economic growth as well as personal financial security.
Keeping Social Security strong should be something we all can agree on. It is one insurance policy we all know is needed, with benefits earned by all who pay in.
We all have a stake in getting this right.