Good morning and thank you for inviting AARP to appear before the Committee to address the important issue of insuring the retirement security of millions of Americans by strengthening Social Security.
Social Security is a crucial part of America's retirement security system and probably the most successful federal program in history. People look upon it as a promise -without an expiration date- that our nation has made to America's workers and to those who have completed their worklife, our retirees.
The program has been periodically re-tuned as the workforce and work skills have changed. Yet, its administrative expenses remain the lowest of any government program—less than 1%. While the program insures families against loss of their breadwinner throughout life, Social Security also has proven to help millions of older Americans maintain their standard of living in retirement.
Social Security is financially strong now and in no danger of "going broke" anytime soon. There is no 'crisis' that demands immediate and radical restructuring of the system. However, it is true that the program is in need of long-term measures to keep it in fiscal balance so that it will be able to pay full benefits to every generation of Americans. The changes do not have to be drastic. However, the longer we wait to adjust the system, the more difficult the adjustments— that is why it is advisable to act sooner rather than later.
One of four pillars. Social Security is only part of the overall retirement security structure. A secure retirement is supported by four pillars: 1. Social Security, 2. Pensions and savings, 3. Continued earnings, and 4. Adequate and affordable health insurance. In that context, the importance of Social Security today is evident as each of the other pillars faces mounting pressures.
Less than 50% of working Americans have a pension plan available at their workplace, so half of all private sector workers have no regular payroll deduction mechanism to save for their future. Traditional defined benefit pensions are disappearing. Many companies that do offer pensions are converting to defined contribution plans, making workers absorb more risk. Defined contribution plans are subject to early withdrawals, poor investment decisions, and the failure to annuitize the account balance upon retirement. So, even if a worker has contributed to a retirement savings plan, it is likely to provide for a much less adequate retirement income level than defined benefit pensions.
Personal savings are at an all-time low according to Federal Reserve figures, and personal debt at an all-time high. In contrast to previous generations, who owned their homes free and clear by the time of retirement, many boomers may retire with substantial mortgages. Many report that they are planning to work in retirement. However, the job market for older workers is difficult for most without recent training and current skills, and age discrimination is still prevalent in the hiring process.