Coastline Pilot

13 May 2005

 

Chasing the Muse

Catharine Cooper 

 

Everyone, it seems, is talking about retirement.  Whether they are in it, about to be in it, preparing to be in it, or realizing, like some of us, that they’ll never be in it …  Retirement is on the lips of everyone.

 

The Social Security debate wages cross state borders, slips through cities and glides from the boardroom to the bedroom.  Is there enough?  When will the system crash?  Is it broken?  Salvageable? In need of an overhaul?  There is no consensus, and what to do about it remains a topic of powerful debate, pressing what we’ve come to know as reds vs blues, farther into their respective corners.

 

Social Security has never figured into my own retirement picture; the numbers have never penciled out, and there’s this odd ten-year gap in my benefits statement, due to the dissolution of marriage prior to the end of ten years.  Since I’ve always worked for myself, the concept of a golden parachute is not part of my vernacular.  No 401k.  No belief that the system was going to take care of my financial needs.  But there are millions of Americans who rely on this system to carry them through their post-wage earning years.

 

The Social Security system pays dividends in relationship to money ‘deposited’ via taxes, based on their 35 highest earning years. By a strange quirk in the tax code, if a couple divorces prior to the conclusion of ten years of marriage, the benefits go to the owner of the reporting social security number. My ex and I dissolved our relationship at 9.7 years, and ten years of both wage earning and contributions vanished from my history.

 

Talk about parochial.  I find I’m a bit steamed that my ex’s next wife will receive monies that I paid into the system.  It’s as if I didn’t exist, or it’s just plain theft.

I’ve written to my representatives, congress people – all to no avail.  I receive the polite form response – Thank you for bringing this issue to our attention – blah, blah, blah.  I know it’s at the bottom of the list, somewhere near global warming.

 

Insult to injury.  Individuals working for corporations contribute 7.65% on income only up to $90,000 (2005).  For the self-employed, we have the luxury of a 15.30% rate.  This is, of course, because the employer must match the employees’ contribution.  And why the cap at $90,000?  Why not simply a straight tax on all income, which some calculations estimate would dump an additional $10 billion into the system.  

 

I have no desire to be an expert at the tax code, but it becomes more important in this period of a dismantling debate to understand both what the current system provides and what would be lost.  I do not trust the folks in Washington to protect my best interests.

 

The Social Security Act of 1935 was originally named the Economic Security Act, and paid benefits only to the primary worker.  In 1939, a change in the law added survivor benefits and benefits for the retiree’s spouse and children.  In 1956 disability benefits were added.

 

From 1937 to 1940 Social Security paid benefits in the form of a single, one-lump payment, with monthly benefits to begin in 1942.  From 1937-1942 contributions were used to build up the Trust Funds and provide a qualification period.  The first lump-sum payment was to a retired Cleveland motorman named Ernest Ackerman.  He retired one day after the law was enacted, and received a one-time payment of 17 cents.  Ida May Fuller, from Ludlow, Vermont, was the first recipient of monthly benefits.

 

The average lump-sum payment in the initial period was $58.06.  Today, the average monthly Social Security payment is $930, with the maximum for fully retired workers in 2005 - $1939.

 

Retire on $930 a month? That’s below the poverty level in the United States.  There can be endless debate on the merit of Social Security at its inception, but we have come to believe that it is designed to protect our senior population from cat food diets and living on the street. Current plans being proposed all include a decrease in benefits over the next 30 years of up to 20%. 

 

This is one debate that begs of our officials to cast aside their partisan politics and look at broader possibilities.  Analyze multiple options.  Engage in information assembly.  Poll bright financial minds.  Put down the need to be right, and develop a solution that leads all Americans to a brighter future.

 

Catharine Cooper can be reached at 949 497 5081 or ccooper@cooperdesign.net.