Why America Needs Social Security

Last Updated Aug 30, 2011 3:59 PM EDT

With the debt super committee reviewing all forms of federal government entitlements, it's good to keep in mind the basic reasons we need Social Security.

As a Social Security recipient, you'll receive a modest monthly income for the rest of your life, no matter how long you live and no matter what happens in the economy. You'll enjoy a basic level of retirement income that you can't blow or lose -- at least, not all at once. After your death, an income will continue to your surviving spouse for the rest of his or her life.

Quite simply, Social Security is a very valuable benefit for the vast majority of Americans, for the following reasons:

  • If we didn't have Social Security, you'd need to rely completely on your savings (and pension, if you're so lucky) for your retirement income. Most people don't save enough for retirement.
  • Even if everybody saved enough money for retirement, it's a difficult challenge to manage your savings to generate a lifetime retirement income. Many people outlive their savings.
  • Many people get set back financially by such life events as disability, high medical bills, divorce, death of a spouse, or a layoff.
  • Many people lose their life savings due to fraud or poor investment decisions.
  • There are many financial institutions that will gladly take large profits from your savings, leaving you with inadequate financial resources.
You could argue that if you're a victim of any of the above circumstances, it's your own fault -- you should have prepared better. But people often get in these circumstances through no fault of their own. And even if you could attach blame, so what? That doesn't change the fact that our society would still have many impoverished elderly citizens with little or no resources.

The sign of a civilized society is that it takes care of its citizens who are less able to take care of themselves, for whatever reason. This practice has gone on since the beginning of humanity, when tribes cared for elderly members who could no longer hunt, forage, or farm. Social Security is just a formalized system of this time-honored practice, and it's particularly important now that we don't live in tribes or small villages, often far away from family members who might care for their elderly parents or grandparents.

Our Social Security system provides a modest level of income. For many citizens, it's a lifeline, providing their only retirement income. We don't throw seniors under a train to fend for themselves, but we don't coddle them, either, as they do in France or Greece. It's a good middle ground for our country, which has a heritage of individualism and self-reliance, but also a rich history of providing help to individuals and nations that have needed help.

Of course, we'll need to review Social Security periodically to make sure it's still affordable, with the proper balance between taxes taken from current workers, and benefits paid to current retirees. We may also need to adjust retirement ages as appropriate, given increasing life expectancies.

Social Security needs to be financed soundly so that we can trust it will be there when we need it. We need to curtail the current practice of using our Social Security taxes for purposes other than providing benefits and piling that unmanageable debt on our children; this undermines trust in our government and in Social Security.

I hope the debt super committee will keep these ideas in mind and recommend bi-partisan solutions that balance tax increases with reductions in entitlements. That's exactly what happened in 1983, the last time we had a funding crisis with Social Security, when major changes in Social Security were approved by a Republican Senate and a Democratic House, and signed into law by President Reagan.

Even if Social Security benefits are changed or reduced, it pays to learn as much as you can about how to make the most of your benefits. That's the subject of this recent video that I appeared in from CBS MoneyWatch:

Social Security is a collective good for our society; it shows that we value taking care of our senior citizens. We should be willing to pay the price.

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    Steve Vernon helped large employers design and manage their retirement programs for more than 35 years as a consulting actuary. Now he's a research scholar for the Stanford Center on Longevity, where he helps collect, direct and disseminate research that will improve the financial security of seniors. He's also president of Rest-of-Life Communications, delivers retirement planning workshops and authored Money for Life: Turn Your IRA and 401(k) Into a Lifetime Retirement Paycheck and Recession-Proof Your Retirement Years.