Nina Smith

Social Security vs. Personal Retirement Accounts: Which Way for Gays?

Filed By Nina Smith | October 15, 2007 7:40 PM | comments

Filed in: Living, Marriage Equality
Tags: lesbians, personal finances, personal retirement accounts, retirement, social security

“They want the federal government controlling Social Security like it’s some kind of federal program.” – George W. Bush

Recently, I heard from Lea Abdnor, the Executive Director at Women for a Social Security Choice in response to my post about how gays and lesbians are Denied Social Security Benefits. In case you forgot, families of gays and lesbians (upon the death of a spouse) are denied the same benefits of heterosexual Americans, even though we contribute equally to Social Security throughout our careers. Abdnor writes:

You are SO right about Social Security penalizing gays and lesbians. I’m straight but I’ve complained about this for years! ‘Legal’ spouses who don’t work a day in their life, and pay zero in Social Security benefits are granted FREE an additional 50% on top of his/her spouse’s Social Security benefit. A relic from the old ages.

If the system allowed workers to put part of their 12.4% taxes in a personal Social Security IRA that the worker OWNED, then the assets in the account (which could be considerable over a working career) would be inheritable.

I’ve never been able to understand why the gay and lesbian community hasn’t been screaming in support of those protected accounts. It wouldn’t preclude working for legal ‘marriage’ status, but personal accounts are a whole lot more likely!

I have to plead ignorance on Social Security reform but Abdnor’s comment gave me good reason to research and then post here on the topic. What I found is that gay liberals typically don’t like the idea of Personal Retirement Accounts (PRA) because it falls under Bush’s reform plan.

But there are two sides to every coin so hear me out. According to the libertarian Cato Institute, “Andrew Lee, an undergraduate student at Claremont McKenna College, writes that Social Security reform is an issue that the typically left-leaning gay population should consider supporting. Same sex partners stand to gain significantly from a system of personal retirement accounts since under such a plan, individuals get to choose who receives survivor or dependent benefits.” If you want to read his thoughts in entirety then click over to the San Francisco Chronicle site. He makes some valid points.

Back in 2004, Mike Hill wrote a brief but compelling piece called, Social Insecurity and why queers should push for PRAs. He writes:

A bitter cat fight has broken out between two leading gay rights organizations over whether or not to support a social security privitization initiative which would, as a part of the reform, allow same-sex couples the same access to the system’s benefits as heterosexual married couples. The left-leaning National Gay and Lesbian Task Force is against this, because they are reflexively against any social security reform, while the centrist Human Rights Campaign is likely to come out in favor of such an initiative.

I don’t care who proposes social security reform — whether it’s Noam Chomsky or Pat Robertson — on this issue, they would have my support. I am 32 years old, and every year thousands of dollars – money I will never see again, since social security will be long since broke by the time I retire – are sucked from my paycheck to pay for Cadillac hood-ornament polishings for wealthy seniors.

Social security reform cannot come too soon — it is my money, so let me save it as I wish. I should note, I am not some anti-tax zealot. I know taxes pay for a civilized society, and I even accept the need for welfare for the truly needy. But social security is not welfare, and it is not a tax which benefits society as a whole. It is a special-interest subsidy for the elderly, including many who are quite well-off. I believe the program should be rolled up…pay people back what they put into it (and no more) and phase it out over the next decade or so, to be replaced with a system where people get to choose where their retirement savings are invested, and where they money is kept in their own names, in private accounts.

Interesting! The problem is: none of the Democrats are for PRAs. You can find out where all the candidates stand (both Democrats and Republicans) by clicking on this link.

Social Security aside, Dan Woog argues that today’s same-sex partners still fare better than preceding generations (due to changing governmental policies and the policies of private employers) in his article: Retirement Issues for Gay/Lesbian Couples. He writes:

Until recently, private savings vehicles like 401ks varied enormously between same-sex and married couples. In August 2006, however, Congress revised the Pension Protection Act of 2006, giving same-sex couples (and nonmarried heterosexual partners) much fairer – though still not equal – treatment.

It’s a start. So back to PRA’s – what do you think? Should we or shouldn’t we? Comments encouraged.

Nina blogs about money over at Queercents.

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It strikes me that the sort of motivation asserted here for "gay liberals" is kind of shaky:

What I found is that gay liberals typically don’t like the idea of Personal Retirement Accounts (PRA) because it falls under Bush’s reform plan.

I don't have liberal values because I'm opposed to George W., I'm opposed to George W. because I have liberal values. I'm also fully aware of the differential treatment of same-sex partners under Social Security (and every other federal program, for that matter), but my answer to the problem is different.

In short, I oppose PSA's that are funded by taking money out of Social Security because I support social insurance as a principle. A better social insurance system in the United States would end our worries about whether or not our partners are insured - everyone's insured under universal health care.

Is that going to change anyone's mind? Probably not. But don't chalk my opposition to replacing Social Security with PSA's up to a petulant anger at George W. Bush and I won't accuse you of hating poor people. Deal?

This article would make Suze Orman so proud! ;)

Surely there are other reasons for opposing PRAs other than "because George Bush supports them." I'd like to know what those reasons are. Or, for that matter a longer reason that tells me why I should want one would be nice.

Hey, this is Eric Schansberg. (It looks like I'll be anonymous and don't want to be.)

A key question is about the average lifespan of those in the GBLT community. The average rate of return for Social Security is 1%. If GBLT lifespans are lower than average, then the rate of return will be lower; if lifespans are higher than average, then the rate of return will be higher. For example, as a group, African-Americans put more into SS than they receive out of it-- not exactly the epitome of justice, efficiency, or sound public policy.

Social Security is a losing bet for most people these days. I doubt that any of us expect it to provide much if anything by the time we retire, which is why I try to divert as much as I can to my 401(k) and IRA.

Like Morgan, I support social insurance as well, but if I was able to divert a portion (not the whole amount-just a portion) of of my payroll tax to a PRA, I would. I think that the implementation of PRA's would be tragic given that quite a few people are disengaged from or frighteningly illiterate in financial matters.

Dubya's plan to just let people invest in the market is scary to say the least unless there's a guaranteed safety net equal to the market return below it, which I doubt he'd include. Also, it would be the financial equivalent of malpractice if every worker in the country was assumed to be a competent investor.

Enron anyone?

There would have to be investment counselors for everyone, and that alone would be enough to kill PRA's from a Republican standpoint, because it would be more bureaucracy.

Marvin Wagner | October 16, 2007 8:27 AM

Concerning the Social Security piece, Bilerico has loss credibility. where are the fact checkers?

Morgan: I appreciate your opinion, but I think liberals would view privatization differently if Democrats came up with the idea.

Lucrece: Personally, I'm not a fan of Suze Orman, but we agree on some things.

Bil: Google "pros and cons social security privatization" and on the first page there are lots of articles that explain why or why not.

Eric: Interesting point. I hadn't considered the LGBT life span, but men obviously get the shaft compared to what women will collect in their lifetime.

Mike: Yes, of course, this is why many people oppose privatization.

I'm not pretending to have the right answer. Social security is a complex issue and the point of this post is to promote a conversation about a solution.

I don't dispute the claim that liberals would look more positively on a system of PRA's proposed by Democrats, but that's a hypothetical that I find unlikely at best. If you remember, Democrats almost universally opposed Bush's PRA plan.

A system that preserves the security net that Mike talks about but also offers opportunities for those with lower incomes to get into the market might mirror workplace 401k plans, but with a government-funded match instead of an employer-funded one. Restricting enrollment to those below some income threshold would provide incentives for saving by low-income Americans without removing the minimum support guaranteed to everyone by Social Security.

As Mike points out, PRA's as proposed in 2005 would be offered to many people with serious financial literacy problems. Allowing a choice among different savings plans is great for those of us who already know we should be saving, but would create potential problems for Americans who wouldn't know a mutual fund from a checking account. Especially for under-informed invstors, management fees might eat up much of the potential gain over Social Security promised by PSA's. One of the little-noted advantages of many government programs is their very low overhead in comparison with private alternatives; Medicare's 2-3% overhead is a tenth of the overhead in private insurance, for example.

Eric: It's true that Social Security penalizes those who die relatively early, which also touches many people with genetic predispositions for cancer, heart disease, and other conditions. But as a form of insurance, it benefits those who live longer than expected, and could help many of us if medical advances prolong lifespans beyond those imagined when we started planning for retirement. Getting to 80 and running out of money can't be any fun, after all!

I think I was lost in this post when I read that the CATO Institute was being cited as a source. It's a think tank - it's goal is not to search for truth but to prove their libertarian agenda. I'd say the same thing about a leftist think tank - their goals are not truth seeking. I remember when I had a little job researching for an "opposing viewpoints" style book, that when there was a side of an argument that no one credible was willing to take up, mostly because the evidence was stacked against it, I'd hit up the think tanks. CATO and Heritage were my first two because they were usually the craziest.

The issues with PRA's are a lot more than just "Bush proposed them". His plan only allowed a small group of firms to manage them, and didn't have any choice built into them at all. They were mainly schemes to force people to invest in his friends' businesses at the expense of Social Security. Since there isn't much to the program besides redistributing money, privatization of Social Security is pretty much just another way of getting rid of it.

And I don't know about Social Security being bankrupt soon. I have an old friend who was really into the social security advocacy and said it's not going to go bankrupt, that it can be fixed, and that worst case scenario it'll pay out 70% of benefits by 2050, not be bankrupt. I don't have sources, so no one take that as fact, lol.

But I just have a hard time when this Mark Lee is saying things like: "thousands of dollars – money I will never see again, since social security will be long since broke by the time I retire – are sucked from my paycheck to pay for Cadillac hood-ornament polishings for wealthy seniors." Yeah. That's what everyone thinks of when they think of Social Security recipients, wealthy and wasteful. Just like those welfare queens, union workers who get too much health care, and MEN DRESSED UP AS WOMEN WHO HAVE TO BE HIRED!!!! Just like, the dude just seems to be fear mongering and trying to build antipathy where there doesn't have to be any.

Anyway, good post, Nina. I'm sorry that my first comment on one of your posts couldn't be "nice", but I usually read yours and I'm just left speechless and feel like bowing before your money intelligence. It doesn't make for good comments, but I'll try harder from now on.


So Bilerico is:

What the Advocate should be.

A platform for pro-pedophilia propaganda.

The religious right's "loyal opposition".

A bunch of bathroom sex trolling radical queers.

A liberal intellectual circle jerk.

A bunch of 'progressive' non-profit hacks.

A bunch of HRC haters.

And now, "not credible on issues of social security".

There are worse things to be called.

But no, we can't hire fact checkers when we're not getting paid ourselves, especially for a post that was meant to raise questions, which it did effectively.

All we can do is lay back and let people tell us about their areas of expertise. It works better in the end for a blog, I've found.

Morgan, Eric~ I don't know if we'll ever know about the whole life-span thing with the gays, considering it's hard to study a group that's probably still half in the closet. But I'm thinking we eat healthier, and that's got to count for something.

My biggest problem with SS is that it takes so much money from the working poor and the middle class-- to set up a meager safety net with a pathetic average rate of return.

For example, imagine a 25-year-old head-of-household with a child who earns $25,000 and loses $3000 to the SS portion of the "payroll tax" on income. Then, the govt promises to start giving the money back to them 40-plus years later-- again, on average, with a very low rate-of-return. What kind of safety net is worth that much pain to the most marginal in our society?

Alex: I don't dispute the fact that CATO and Heritage usually have the craziest viewpoints, but that's why I like them. I'm a registered Democrat but the older I get the more I lean toward Libertarian thoughts. CATO is always good for providing a thought provoking view and as you agreed, that was the point of the post -- to make us consider an alternative to Social Security as it stands today. P.S. Your reply to Marvin made me smile.

Marvin: Where are the spell checkers? It should be "lost" credibility.