Oral Testimony of Kenneth Apfel Commissioner of Social Security
Hearing before The Senate Democratic Task Force on Social
Security
September 13, 1999
Good afternoon, Mr. Chairman and Members of the Task Force. Thank you
for inviting me to discuss Social Security's role in the economic status
of older women and proposals to eliminate the retirement earnings test or
RET. I would like to commend the Chairman and the members of the Task
Force for the important work you have done to further the National
discussion on Social Security reform and solvency.
The program's solvency is particularly essential in improving
retirement income adequacy for elderly women. Most importantly, I am
convinced that the President's framework for reform will lead to solvency.
As you know, the President's framework provides the following keys to
Social Security solvency:
- locking away the entire Social Security surplus each and every year;
- transferring interest savings on the federal debt to Social
Security;
- investing no more than a maximum of 15 percent of the transferred
amounts in the private sector to achieve higher returns for Social
Security.
We have an historic window of opportunity to meet the challenge facing
Social Security - and we must act now to guarantee that the most important
social welfare program of the 20th century is preserved and strengthened
for the 21st century.
The President is also proposing Universal Savings Accounts or "USA's,"
a progressive, voluntary retirement savings plan to supplement Social
Security and other retirement income. Lower and moderate-income
participants - who find it most difficult to save -- would receive
automatic contribution credits deposited directly into their USA accounts
to help them get started saving for retirement. This would be particularly
advantageous for women, who often don't have pensions or savings to
augment Social Security benefits.
In fact, as far as older women, it is impossible for me to imagine a
government program with a greater positive impact. These are not faceless
people, but our sisters, our mothers, our grandmothers and our great
grandmothers. Their retirement security often depends on Social Security.
While more than 40 percent of all older Americans are kept out of
poverty because of Social Security, I agree with the President that when
even one older American faces poverty, we cannot rest easy. His statement,
"We should reduce poverty among elderly women who are nearly twice as
likely to be poor as our other seniors," goes to the heart of the matter
before us today. We must make sure that when we look at Social Security
reform and poverty, we do better for female senior citizens not worse.
As you'll remember, SSA has done an analysis showing the distributional
effects of various Social Security solvency options by gender and income.
We are continuing to work further in this area.
In December 1998:
- 19 million women aged 65 and older received benefits compared to 13
million men 65 and older;
- 36 percent of these women are protected on the basis of their own
earnings in Social Security covered employment;
- 28 percent of aged women beneficiaries are dually entitled to higher
benefits as a spouse or widow;
- 6.8 million aged women receive benefits only on the basis of another
worker's earnings; and
- almost three-quarters of Social Security beneficiaries aged 85 and
older are women because, on the average, women live longer than men do.
But these benefits only tell part of the story. For nonmarried aged
women beneficiaries, which includes divorced women, widowed women and
women who never married, the facts are astonishing.
For them, Social Security:
- is the major source of income for 76 percent;
- contributes 90 percent of income for about 41 percent; and
- is the only source of income for 25 percent.
Other important aspects of Social Security that help older women are
the automatic cost-of-living adjustments and the progressive benefit
formula. The latter is particularly germane since women on average earn
less than men, due to wage differentials and shorter careers.
I also agree with the President that we should not drain resources from
Social Security in the name of saving it. In particular, some of the
carve-out proposals would lead to a loss of the progressive nature of the
Social Security benefit formula.
Also, while the current program provides inflation-protected benefits
for life, individual accounts may not have this same guarantee, plus women
could end up with smaller accounts because of their lower earnings and
tendency to invest more conservatively. And finally, individual accounts
would not provide supplemental protection for dependents.
Now I will discuss the Retirement Earning Test which has been part of
the Social Security System since the beginning. Eliminating the RET would
give older Americans greater freedom to work while receiving their Social
Security benefits - which are meant to be supplemented by pensions,
savings and other forms of income.
On balance, the positive effects of eliminating the RET above the full
benefit retirement age outweigh the potential negative ones. The choice is
less clear regarding elimination of the RET below the NRA. The decision to
retire early, while based on short-term needs or considerations, would
have the long-term effect of reducing these individuals' monthly Social
Security benefits.
It should be noted that the survivors of workers who retire before full
benefit retirement age also get permanently reduced benefits due to the
worker's decision to retire early.
The Administration and Congress have worked together successfully to
create a prosperous economy for our country - a situation we might not
have predicted only a few short years ago. I believe the next step is to
strengthen and protect the Social Security system for future generations
of Americans.
I will be happy to answer any questions you may have.
Top of Page
|