The following remarks were made by Barbara Kennelly, President and CEO of the National Committee to Preserve Social Security and Medicare [1] on October 21, 2009 at the Re-Envisioning Retirement Security [2] conference.
Thank you all for coming, and thank you Karen for inviting the National Committee to participate in this important initiative. As President of the National Committee to Preserve Social Security and Medicare, I represent over 3 million seniors who understand the importance of Social Security and Medicare, and share a passion to see these critical programs preserved and strengthened.
We believe it is particularly appropriate that we begin any discussion about retirement by first talking about the foundation of all American’s retirement security – Social Security. This is especially true in times like today’s economic crisis.
Social Security was born out of economic circumstances much like these during the Great Depression. At that time, only a few companies offered pensions and no one had invented 401(k) plans or IRAs.
Prior to Social Security, people saved what they could during their working lives, and those with families routinely moved in with their children.
Over one-half of older adults lived their retirement years in poverty.
When the Great Depression hit, it wiped out what little savings both workers and their parents had accumulated over the years – much as today’s plummeting housing and stock values have affected their children.
Social Security created a reliable, modest stream of income for older adults, providing a cushion for them to leave the workforce and make their jobs available for younger generations desperate to find work. In many cases, the senior’s Social Security check was the only reliable income the entire extended family had to live on.
Today, Social Security provides modest benefits – the average benefit for retirees is only $13,800 a year – but those benefits are crucial. A full two-thirds of the elderly receive more than one-half of their income from Social Security, and one-in-five have no other income but Social Security.
If you don’t count Social Security today, almost one-half of those over age 65 would have incomes below the poverty line – just about the same poverty rate as before the enactment of Social Security.
Social Security provides a steady stream of income that you cannot outlive, with built-in protection against the ravages of inflation. These guaranteed benefits are unaffected by the ups and downs of the stock market.
This makes Social Security a rock in today’s chaotic financial world. And because our children’s financial world is even riskier than ours is, future generations will clearly need a dependable, solid Social Security benefit just as much as today’s retirees.
For groups like the National Committee, these features make Social Security the ideal retirement system. Unfortunately, it was never intended to be a worker’s sole source of retirement income.
And despite how many retirees rely on it, Social Security today replaces only about 40% of the average worker’s pre-retirement income – a replacement rate that is scheduled to shrink for future retirees as an increase in the normal retirement age continues to phase-in.
Ideally, we at the National Committee would expand Social Security as the best way to strengthen worker’s retirement security.
But we do not find ourselves starting with a clean slate. The groups participating in this discussion understand that America was built on a retirement system that is a mixture of public and private, and so we have focused our attention toward identifying the principles that should guide the creation of the strongest private system possible – one that combines the best parts of defined benefit plans and the best parts of 401(K) Plans with additional features.
Designing a new retirement system takes time, and we believe the time to begin this discussion is now – because it is in hard economic times that the shortcomings of today’s system become most apparent.
At the National Committee, our mission includes promoting the financial security of future generations of Americans.
We believe the principles laid out by the Retirement-USA initiative provide a roadmap for creating a retirement system that – together with strengthening Social Security – will provide a secure and reliable retirement for our nation.
We strongly endorse this effort, and greatly appreciate the opportunity to be part of it.
Thank you.