Personal retirement account details still sketchy

Poll after poll goes on to show that Americans are highly confused about what they really want to do with Social Security. The results seem to vary with how the question is worded and who is sponsoring the survey. But two clear messages seem to emerge from all surveys:

• Private retirement accounts, in principle, is a good idea (Who can argue with the logic behind it?)
• Americans do not want uncertainty/instability when they are totally helpless in a society that increasingly treats its seniors as a burden.

If given a choice, three-in-five Americans would strengthen Social Security with as few changes as possible, according to a poll conducted by AARP. The poll also found that the more Americans learn about diverting Social Security taxes into private investment accounts, the less they like the idea. This is happening because most Americans still do not fully understand how these accounts will work. While some find the idea of playing with money in the stock market very tempting, when they are reminded that they could potentially lose all their retirement savings, they prefer more stable (but possibly less) Social Security benefits rather than high (but more unstable) retirement income.

Two-thirds (66%) of Americans age 30 and above support keeping Social Security as is, including 6 in 10 (62%) Gen Xers ages 30-39. A similar number of leading edge boomers ages 50-59 (65%) and a clear majority (57%) of boomers ages 40-49 agreed. This poll is clearly showing a shift among younger Americans, who in previous polls, had indicated higher support for individual retirement accounts. It is obvious that with the discussion just starting and Americans learning more about how their Social Security system works and what it means to divert the funds into private hands, they are also appreciating the risks.

"A majority of Americans, even younger adults, would like to see Social Security continued substantially as it is today," said AARP CEO Bill Novelli. "Social Security does need to be strengthened and people accept that fact. On one hand, the public has been told to have doubts about their Social Security benefits. On the other hand, they expect the government to deliver on its obligation to honor those benefits." Novelli added.

More than two-thirds of people under age 50 are not confident that Social Security will be there for them, the AARP poll indicates. But a strong majority of all those polled (83%), agreed that Social Security should be strengthened rather than replaced, and that private accounts would hurt Social Security (60%).

"Most people who are not retired or close to retirement know little about Social Security," said Novelli. "A political undercurrent of uncertainty contributes to support for investing a portion of their Social Security taxes in the stock market. But support falls away the more people learn about private accounts and how they might work," he concluded.

After initial supporters had been exposed to all of the consequences of diverting payroll taxes to fund private accounts, only 10% still favored them. This means, in the context of the entire survey sample, that only 5% favored this approach once the consequences were evident.

The survey found that 43% initially supported the concept of diverting payroll contributions to fund private accounts. But barely a quarter continued to support private accounts if it meant a lower Social Security benefit in retirement. The $1 trillion in additional debt in order to pay Social Security benefits to current beneficiaries reduced support to less than a fifth (18%) of respondents. Leaving responsibility for this debt and for Social Security's current shortfall to our children reduced support even more, to 17%.

"A lack of knowledge about private accounts is a dangerous thing," explained Novelli. When people are exposed to the full details of private accounts, support falls to only 5 percent."

In summary, Americans need to start learning about personal finance, retirement planning, and 401(K) programs right away so that they can plan for retirement.

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