Uncle Sam Spurs Savings

By CBSNews.com staff CBSNews.com staff

September 30, 1999 / 4:51 PM EDT / CBS

Starting this month, 125 million American workers will be getting a little something in the mail from the Social Security Administration.

Workers older than age 25 who are not yet receiving Social Security will receive a statement detailing an estimate of their contributions to Social Security (FICA), from their first job flipping burgers to their most recent job on Wall Street.

It will also show what they can expect to receive, based on their past and projected future earnings, when they hit retirement age.

Federal administrators hope the statements will encourage more workers to see Social Security payments as only one part of a broader retirement income plan they must organize before they stop working.

"Of course it's hard to fully plan for tomorrow when you don't know where you stand today," President Clinton said Friday morning before leaving for a weekend fund-raising swing through Nevada and California.

"This new Social Security statement will help more Americans understand what Social Security means to them," Mr. Clinton said. "It will form a vital part of any family's financial planning and help more Americans chart a course to retirement that is clear and secure."

Calling Social Security "an unshakable covenant among generations between workers and retirees, between the disabled and the able-bodied," the president also took a few swipes at congressional Republicans.

While both parties have pledged to protect Social Security from budget raids, Mr. Clinton said the GOP is using a surplus in the Social Security trust fund to offset other spending. Republicans insist they will not do that.

"This is a difficult thing for the Republicans because unlike us, they don't want to provide reasonable offsets so that we can begin this year to segregate the Social Security surplus from the general revenue surplus, and not dip into the Social Security surplus anymore," Mr. Clinton said.

In the past, the Social Security statements have been available upon request, and 37 million Americans have asked for theirs since 1988.

But now, the personalized letters will be mailed automatically, in batches of 500,000 a day, timed so that every worker over age 25 will receive an updated one each year about three months before his or her birthday.

Kenneth Apfel, commissioner of the Social Security Administration, tells CBS This Morning's Thalia Assuras that the page listing estimated benefits is "to give people a good sense about what their Social Security benefits are at retirement."

"We want to help people understand what Social Security is, but also what it isn't. It's hard to live on Social Security," he adds.

Apfel says the mailings are designed to help people plan their finances. The average Social Security benefit is $800 a month, and most people only find that out when they are ready to retire. "Giving that information to people earlier helps the plan for the future: 'What do I need in terms of savings? What do I need in terms of pensions?'"

The four-page statements include the following:

A two-column chart showing annual earnings for each year subject to Social Security and Medicare taxes from a person's first job to 1998. These numbers are significant because the amount of future Social Security benefits depend, in part, on a person's past earnings and tax contributions.
The total amount of taxes a person has paid into the retirement system over the years, and separately, what his or her employers have paid. Employers must match employees' Social Security and Medicare contributions.
Estimates of monthly retirement benefits assuming a person continued earning at his or her current salary level until retiring early at age 62; on time at 65, 66 or 67; or late at age 70. The age of eligibility for full Social Security benefits is scheduled to rise incrementally to 67 from 65. Those who choose to retire even later get higher monthly benefits.
Estimates of monthly disability benefits if a worker became disabled now.
Estimates of survivor benefits a worker's family would receive if the worker died this year.
And a toll free telephone number that people can call if they find mistakes in their statements.

Financial planners generally tell working people that they will need about 70 percent of their current income to live comfortably when they retire.

For average earners, however, Social Security benefits will replace only about 40 percent.

According to CBS New Correspondent Diana Olick, the Social Security statements are a definite plus. "The new plan helps Americans keep tabs on their financial futures," she said, "but it also helps them keep tabs on government....because if you don t know how much you re supposed to get, you re not likely to miss it if the politicians try and take it away."

For more information, visit the Social Security Administration Web site.