George Bush's plan is to allow workers to divert a portion of their Social Security tax into private accounts. This money then becomes theirs. The idea is that they may be able to earn a better return on that money than the Social Security program does. They'd better, because "catch" is that by doing so, their guaranteed benefit will be lower, with the money in the "private" account supposedly making up the difference. If the stock market tanks just as you're about to retire, too bad. Still with the heady experiences many investors have had in the longest running bull market in history, the idea has a certain appeal for some. Unfortunately, the appeal is based on a fundamental misunderstanding of how the Social Security system works.

Social Security taxes are not "invested" at all, much less "earn a return." You pay your FICA taxes. The government turns around and sends that money to seniors now receiving Social Security. It is true that there is more money coming in right now than money going out. The extra money is being saved, because as of 2015, based on population and employment projections, there will be more money going out than will be coming in.

So Social Security really isn't a "retirement investment" in the way most of us have come to understand it. It is a program that pays you a fixed benefit for as long as you live, based on calculations relating to your lifetime earnings. You can't lose it, and you can't outlive it.

Gore's plan maintains this "guaranteed benefit" aspect of the current Social Security program, plus adds some enhancements that address the most serious problems faced by women under the current structure: The time working women drop out of the labor force to care for children, and the reduction of benefits for widows. Gore proposes that a care-giver would be credited as having "earned" one-half of the average wage (about $16,500 in 2001) in the computation of his or her Social Security benefits, for up to five years. The amount would be indexed to inflation, and offset by any actual earnings if the care-giver worked part time. His proposal also provides a "floor" for widow's benefits of at least 75 percent of the couple's previous (combined) benefit. This brings the survivors' benefits closer to the actual reduction in cost of living that they experience after the death of their spouse.

I took a detailed look at both candidates' plans during the primary season. And, although Bush has added a few more details to his plan than it had then, the basic factors of each candidate's plan have not changed. Neither has the basic fact that women have the most to lose under George Bush's Social Security reform proposal, and have the most to gain under Al Gore's Social Security reform proposal. For once, it's really that simple.

~Karen~

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