Read the Fine Print

August 16, 1999

The Social Security Administration is touting its new and improved Social Security Statement, designed to tell workers how much taxes they have paid into the system and how much they will receive in benefits once they retire. As such, Social Security Statements are a good idea.

Yet, a smart consumer always knows to check the fine print. Unfortunately, on the Social Security Statement there isn't any. You'd never know it from the Social Security Statement, but after 2014 Social Security will be unable to pay full benefits without an increase in taxes. Yet as far as a reader of the Social Security Statement can tell, his benefits are assured. These benefit estimates simply assume away Social Security's multi-trillion dollar unfunded liability, without factoring in the tax hikes, benefit cuts or increases in the retirement age necessary to maintain solvency. The closest the Social Security Statement comes to acknowledging the program's looming insolvency is the remark that "some people are concerned that Social Security won't be there for them when they retire."

The Social Security Statement contains plenty of statements such as "Social Security is for people of all ages," and "Social Security is here to help you when you need it most." Yet somehow room cannot be found to state the obvious: without Social Security reform, retirement security won't be there when we need it most.

Just as a statement from your private pension plan contains consumer disclosure information, Social Security Statements should also contain fine print with important information like this:

• The Trust Fund is not an asset Social Security can rely on in the future.

• After 2014, Social Security cannot pay full benefits without tax increases.

• The government can cut your benefits by any amount, at any time, for any reason or no reason at all, and you have no legal recourse.

Opponents of Social Security privatization stoke fears of innocent investors falling prey to dishonest and deceptive stockbrokers. But in this case, it is the Social Security benefits estimate that needs some fine print.

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