Schizophrenic over reform

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Dear AARP: I'm confused. I'm 57, and ever since you enticed me into AARP with those great discounts, I've been trying to figure out your position on Social Security reform.

I'm trying to learn the party line and get with the AARP team playbook. Your recent full-page ads have told me in no uncertain terms that investing for my retirement is like playing the slots at Vegas -- risking everything on a giant stock market roulette wheel. Wow. I didn't realize how foolish I've been all these years, putting money into mutual funds and bonds. Guess I'd better cash out my IRA and 401(k) account while's there's still time and sock the cash away under the mattress -- and tell my Baby Boomer friends to do the same.

But here's why I'm confused. I just looked at your AARP Bulletin online financial help. Your money guru tells me I should put money into my 401(k) as quickly as possible, not take it out before Vegas gets it. He is panicking me by saying we 50-somethings don't invest enough in retirement plans. Doesn't he know about that awful roulette wheel? Haven't you told him about those terrible slots? I guess he needs to be educated, or maybe fired, before he misleads anyone else.

It's very confusing. In or out? Seems to depend on which page of the Bulletin I'm reading at the time.

But that's not all. It turns out my beloved AARP is actually helping run the roulette wheel. AARP has its own investment program, with Scudder Investments. You even have a Web site showing me all the great mutual funds and stock index funds I can invest in. The guys who write the AARP ads equating investment with Vegas need to look into this. Seems there's sin taking place right in the chapel.

With all that, I guess I shouldn't be too surprised to read elsewhere that AARP isn't exactly against personal retirement accounts. We AARP members apparently can support personal accounts if working Americans just fund them with more of our own money, on top of paying Social Security taxes. Maybe we even can support helping people create such "add-on" accounts with some matching money from Uncle Sam (i.e., the taxpayer). We're just not supposed to support putting some of our own payroll taxes into them.

So we actually should support personal retirement accounts after all, right? Now that's really confusing.

Seems to me there are only two explanations for this curious position. One is that AARP actually wants its members to play the slots with our savings and risk blowing all that money. If so, AARP should shutter its investment advice Web sites and tell us that putting money into safe mutual funds and bonds is the financial equivalent of hang-gliding.

The other explanation is that there's more politics in all this than meets the eye. If AARP's money advisers are right, then the ads are nothing more than scare tactics and should be withdrawn. Do you truly want us to unload all of our retirement investments as quickly as possible? I doubt it.

So AARP's bottom line seems to be that it's wise for workers to put money aside and get the good returns they can receive from safe mutual funds, providing they still have extra money sitting around after they pay their taxes.

But millions of lower-and modest-income Americans save nothing for their retirement because high payroll taxes mean there's nothing left to save and invest. And the return they get from traditional Social Security on their payroll dollars typically is far below the long-term return on safe mutual funds, and getting worse. Plus, Social Security doesn't give them a nest egg they can use during retirement or pass on to their heirs when they die, even it that's before retirement.

So the add-on personal accounts AARP seems to support just mean more money for those well-off workers who already have money to invest. They do nothing for the poor guy who pays his taxes but has nothing left over. According to AARP, we must make sure he can't improve his retirement by asking to have some of his payroll tax put into a safe mutual fund... er, sorry. I meant "the slots." As the saying goes, "to those who have, it shall be given."

You can see why I'm confused.

Now, about those AARP travel discounts... .

Stuart Butler is vice president for domestic and economic policy studies at the Heritage Foundation.