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Press Release

    CSE's Personal Retirement Account FAQ

    07/06/2001

    Why reform Social Security?

    There are two basic reasons Social Security must be reformed:

    A Financial Crisis
    Social Security will run deficits by 2016 and be bankrupt by 2037.
    Unless we act now, the next generation of retirees will be confronted with skyrocketing taxes and evaporating benefits.
    Social Security is a bad deal – especially for younger Americans
    Most younger workers will get a meager 1 percent to 2 percent return on their Social Security tax contributions.
    Many workers – especially minorities (who, on the whole, have a shorter life expectancy) - will receive less money from Social Security than they put into the system.
    Why won’t there be enough money in the "Trust Fund?"

    Since the system is pay-as-you-go, the benefits of today’s retirees are dependent on the taxes paid by today’s workers. As the ratio shrinks, the system will be unable to pay retirees’ benefits.
    Worker to beneficiary ratio was 42 to 1 in 1945, 5 to 1 in 1960, currently about 3.4 to 1, and will be 2 to 1 in 30 years.
    Can’t we just use the surplus to fix the problem?

    The projected surpluses could barely put a dent in the impending shortfalls. Unless serious reforms are made, the surplus could only delay the inevitable collapse of the entire system.
    Rather than simply postponing the inevitable, the surplus could be used to start a better system that would be sustainable for many generations.
    What are Personal Retirement Accounts?

    Personal Retirement Accounts, or PRAs, are individually controlled, voluntary retirement funds. They allow workers to divert a portion of their payroll tax into private investment accounts that will earn interest and remain under their personal control.
    PRAs would provide individuals more control over their savings and yield higher returns for retirees.
    PRAs would make Social Security sustainable and profitable for generations to come.
    Won’t retirees lose their benefits if we change Social Security?

    No. According to the principles governing the President’s Commission to Strengthen Social Security, the benefits of current and near retirees will remain unchanged.
    The surplus will be used to ensure that seniors will not lose the benefits that have been promised to them.
    Isn’t it risky to put retirement savings into the stock market?

    The greatest risk to workers’ retirement savings is to proceed in the current where workers will only get a 1 to 2 percent return.
    The average real return on stock market investments over the past century is about 7 percent. Studies have also shown that the worst 30-year performance of the stock market in U.S. history provided a real return of 5.2 percent. Indeed, the worst 63-year performance (reflecting an adult lifetime) provided a real return of 6.3 percent.
    Additionally, PRAs will pay out a guaranteed minimum or “safety net” to ensure that all Americans will have a secure retirement.
    Won’t poor people lose out if we reform Social Security?

    The poor would benefit greatly from Personal Retirement Accounts by receiving significantly higher benefits than they would through Social Security.
    PRAs would make all Americans a shareholder in our economy and give every worker a stake in our shared prosperity.
    What can I do to help PRAs become a reality?

    Call, write, e-mail, fax, or visit your Members of Congress and tell them to support reforming Social Security through PRAs.
    Write a letter to the editor of your local newspaper about the benefits of PRAs.
    Work with CSE to help bring about PRAs!
    Better retirement security, more control – Make it Personal!