Bush has some explaining to do
There's one thing I think we can all agree on when it comes to President's Bush's proposal to set up personal investment accounts as part of the Social Security program: As the saying goes, the devil is in the details and the details are woefully lacking.
We know that people born in 1950 or later could (they have a choice) divert up to 4 percent of their income subject to Social Security taxes into individual accounts, up to $1,000 the first year. People will only be able to invest their money in a limited, conservative mix of bonds and stock funds.
With such a major overhaul of a critical social program, the specifics of how the administration sees the program working should be out there for all of us to review. Right now, we are getting just bits and pieces, and that's not enough.
A senior administration official, who agreed to speak without attribution, met with reporters recently to brief them on Bush's plan. From the official's answers, implementing this proposal is going to be problematic. Here are some of Bush's statements and reader questions regarding them:
Isn't it possible that some people who put money into private accounts will lose some or all of it? "What then?" asked Ed Buckley of Rochester, N.Y. "Are these people simply out of luck? Do they just fall back into the 'traditional system? If there is a safety net, which there must be, what is the incentive for prudent investing?"
Readers have asked whether we should take that statement as a government guarantee. "Can retirees sue the government if they don't get the promised returns?" Fran Downey of Acworth, Ga., wondered.
Sylvia Adelman of Wilmington, Del., asked: "If money that is currently paid to Social Security is diverted to private accounts, how will that money be replaced in the budget?" And Jim Thompson of Pleasant Hill, Calif., wanted to know "what happens to the survivors and disability part of the program?"
What happens if someone doesn't have a will and has children from multiple relationships or marriages, asked Allan Lefcowitz of Washington. "Who will decide how the money is divided? Since, theoretically, the monies in the private account would be part of the individual's estate and pass through to heirs, would they not also be part of the assets to be divided in the event of a divorce?"
Additionally, since a spouse under the current Social Security system is entitled to benefits, would a wife get a reduced benefit if her husband diverts funds to a personal account? According to Bush, the money in personal accounts would "belong" to the individual. So, Lefcowitz wonders whether funds placed in the personal accounts can be divided between divorcing spouses. Would private Social Security accounts be exempted from community property laws?
By the way, according to the administration official, participants would be required to buy annuities so that they would have a steady stream of payments over their lifetime. But if this is the case, how much from the investment accounts would really be left to leave to heirs? "If you buy an annuity and die early, obviously, that limits the amount that you've been able to pass on," the official said.
Katrina E. McKinney of Boise, Idaho, said she supports Bush's plan, sort of. "There are too many unanswered questions to be able to make an educated decision," she wrote.
"Why are we being asked to support such massive changes without being given more information?" asked Susan Vadas of Columbus, Ohio. "That is a huge red flag for me."
Me, too.
Michelle Singletary is a columnist for The Washington Post. 