Pension Plan Isn’T Doomed To Self Destruct

Andy Landis, a nationally recognized expert on Social Security, says he sometimes toys with the idea of having two bumper stickers printed.

One would exhort anti-abortion activists as follows: “If you don’t like abortions - don’t have one.”

The other sticker would address the clamor to scrap Social Security so some people can divert their payroll taxes into the go-go stock market. It would read: “Want to open a private investment account? Go ahead - nobody’s stopping you.”

In either case, the principle involved is freedom of choice. It is the right to choose - whether or not to risk one’s retirement nest egg in the volatile stock market - that makes it necessary to preserve the Social Security system, under attack as being underfunded and underperforming.

Landis may be biased. He has spent the past two decades helping people make sense of Social Security. For several years, Landis was a field representative of the Social Security Administration. He created video tape programs and wrote two books on the topic.

More recently, Landis was a regional representative in Seattle for the American Association of Retired Persons. He now divides his time between lecturing, writing and consulting on Social Security matters. He is Washington state president of the International Society for Retirement Planning.

At a recent workshop in Spokane on personal financial planning and in a telephone interview last week, Landis expounded on what he sees as the biggest threat to Social Security. It is the misconception that the system is doomed to self destruct.

At the center of a huge national tug-of-war over Social Security benefits are predictions that the system may face a funding shortfall. The key words, Landis stresses, are “may” and “shortfall.”

“First,” he says, “nobody seriously questions that Social Security is fully funded for at least the next 30 years. What’s more, later this month, Social Security trustees are expected to release a new report. “Rumor has it,” says Landis, “they will report that, because the economy is so good, full funding may well extend beyond the year 2029.

“But even if full funding does come to an end at the height of the Baby Boomer retirement crunch, Social Security will still be at least 77 percent funded,” says Landis. “Hardly anybody realizes this, but Social Security is more than three-fourths funded for as far as anybody can see. So let’s face it, the end of the road in not in sight. At worst, the pavement narrows 23 percent. This is manageable.

“This is not World War III,” says Landis. “This is politics.”

But Wall Street and some politicians are fanning fears. They would permit individuals to invest all or part of their payroll taxes in private investment accounts. The White House has voiced concern about “privatizing” Social Security. President Clinton says the future of this granddaddy of all safety nets can be guaranteed by less radical measures, such as making minor modifications in payroll taxes, benefits, and the retirement age.

Landis says that throughout the upcoming debate on what should be done, it is critical for Americans to realize that Social Security was never meant to be a go-go investment. It is a form of insurance which provides a guaranteed nest egg for individuals and their spouses.

“It’s unrealistic to expect Social Security insurance to perform like a growth stock,” says Landis. “What rate of return are you getting on your car insurance, your homeowner’s insurance, your health insurance?

“If you want to open your own investment account after you pay into your Social Security retirement insurance, go for it. Nobody’s stopping you. Private investing is encouraged. It’s part of what used to be called the three-legged stool of retirement planning - participation in a work-based pension plan, Social Security, and personal savings (or investment). “Nowadays, people are talking about adding a fourth leg - work in retirement,” says Landis.

His latest book, Social Security: The Inside Story, ($14.95; Crisp Inc., publisher) is available through book stores or from the publisher, 1-800-442-7477.