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THE FINANCIAL STATEMENT YOU NEED BUT DON'T GET
STANFORD - If your bank, pension plan and stockbroker can send you annual statements, why not the Social Security Administration? asks Stanford University economist John Shoven.
Unlike their Canadian counterparts, the vast majority of American workers have no idea how much they can expect to get from social security when they retire, Shoven told a Congressional committee recently.
They don't know because the U.S. government tells only those who make a formal request for a statement, and the retirement system is far too complex for even an economist to calculate his or her future benefits without one, Shoven said.
"If I can influence policy a little bit in only one dimension," Shoven told the Senate Finance Committee in March, "let me urge that the Social Security Administration moves rapidly to initiate mailing annual statements to all participants."
Congress has directed the Social Security Administration to prepare annual statements for its 135 million contributors by the year 2000, but Shoven would like to see it happen sooner, along with a commitment from government to better inform people on how to supplement their social security.
"Most people wait until they are near retirement, go to the Social Security Office and ask, 'What do I get?' " Shoven said in an interview after his testimony. In worst case scenarios, some find out they don't qualify because they worked fewer than 40 quarters in jobs where they and their employer paid into social security. Others may find errors that will require finding old paperwork to correct.
A social security statement has valuable estimates not only of your potential retirement benefit but what your minor children would get if you died, what you would get if permanently disabled, and what your spouse can anticipate in retirement as a result of your work, he said.
Most important, he said, annual statements would give mid- career, middle-class baby boomers a basis from which to begin planning how they'll save enough for their retirement.
Shoven suggested to Congress that the Social Security Administration not only send annual statements to its 135 million contributors but also fill the remaining space in the envelopes with promotional materials making it easier for people to save for their retirement.
"They could include some norms about how much it costs to retire, tell people what kind of an accumulation they need to replace their current earnings or standard of living, and provide some information on who is eligible for what type of supplemental individual retirement accounts," he said. "The message would be, 'Here's all we can do for you. You've got to take care of the rest.' "
Shoven recently requested his own social security statement, the first since 1966. He happened to see a tear-out request form in a government pamphlet but has since learned there is also a toll-free number people can call to request a report specifically for them: (800) 537-7005. People can also call a regional social security office and request an appointment.
"One reason to get these statements annually is so you can check to see if your employer and the government have recorded your income accurately," Shoven said. "I didn't find any mistakes in my report, but then I don't have a perfect memory, and I didn't have my [employment] paperwork back to 1966. "
Americans have one of the lowest saving rates in the industrialized world, which Shoven and other economists argue, hurts the nation's overall economy as well as the individuals who don't save.
"If you are used to making $3,000 a month and you learn that your benefit is going to be $1,100 a month, you can figure out what that means. I think many people would save more if they got a social security statement," he said.
Only about half of Americans have pension plans through their employer. For a majority of workers, Shoven said, their social security tax is larger than their federal income tax, and social security benefits are their largest retirement asset.
"Social security more adequately replaces the earnings of relatively low-income workers, because there is a certain amount of progressivity built into the system," Shoven said. "It is particularly middle- and high-paid workers that need to supplement their benefits" with pension plans, individual retirement accounts or other forms of investment.
"People concentrate on saving for the expense of college or buying a house, but retirement is a bigger need in many cases than either of those. Many of us can anticipate living for 20 to 25 years without a paycheck."
[NOTE: THIS NEXT PARAGRAPH IS FOR CAMPUS REPORT ONLY] Career-length Stanford University workers who have taken advantage of the university's pension or annuity plans should have adequate retirement resources when those benefits are combined with social security, said Shoven, who has chaired the university's retirement plan advisory board.
Yet a majority of Americans say in opinion polls that they don't believe they will get anything out of social security, said Eduard Lopez, deputy staff director of the Senate Finance Committee. Sen. Daniel Moynihan (D-N.Y.), who chairs that committee, has felt that more people would believe it if they occasionally got a statement, Lopez said. Moynihan pushed through a bill in 1990 that will require the Social Security Administration to start issuing statements to all workers age 55 or older in 1995. The agency has until 2000 to issue a statement to each of its contributors, Lopez said. Canadian officials who prepare annual statements testified before Congress that the primary cost is postage, because the individual records must be maintained anyway, Lopez said.
"Some people probably exaggerate what social security will do for them, and others expect nothing. This misinformation is harmful in either case," Shoven said.
"I'm not one who believes the system is going broke or won't be there. It's true that retired people today are getting a higher rate of return than we future retirees will get, because they paid in a lot less," he said.
"That doesn't mean we won't get benefits that are comparable to those being paid today, and perhaps a little better because life expectancies continue to rise, which means many of us will live longer."
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