- The Washington Times - Thursday, June 2, 2011

Social Security and Medicare are emerging once again as seemingly untouchable third rails of politics despite their looming insolvency, and economists say the reason is obvious.

Surveys show that a majority of Americans will rely solely or mostly on the programs for support in their retirement because they have not saved adequately.

That was not the way it was supposed to be. Social Security originally was intended as a supplement to retirement income such as corporate pensions and personal savings — one leg of a so-called “three-legged stool” of retirement support.

For most Americans, however, it’s the only leg of the stool left standing because of paltry personal savings and depleted corporate pension plans, prompting people to reflexively oppose any changes in the social programs.

More than half of all workers in the United States have less than $25,000 in total savings and investments, according to Federal Reserve surveys, and the average balance for someone approaching retirement was just $78,000. That amount leaves the average retiree with about $3,100 a year or a little more than $250 per month — not enough for even basic expenses.

The average Social Security check, by contrast, is about $1,200 a month.

“Most households have no retirement plan other than Social Security, and the average American family has not saved enough to maintain its standard of living in retirement,” said David Wyss, chief economist at Standard & Poor’s Corp.

This is why the “relatively minor tweaks,” such as nudging up the retirement age, needed to make Social Security solvent, and the more major overhaul needed to restore solvency to Medicare have been so hard to accomplish politically, particularly when it involves asking retirees to pay more for their health care, he said.

Estimates of the value of Medicare benefits for retirees range from $7,000 to $11,000 a year on average.

“Shifting the costs onto the retiree seems a likely reform,” said Mr. Wyss, “but unfortunately runs against the fact that retirees already have too little to retire on now.

“Society needs to make a choice about the cost and timing of retirement as well as the extent to which the public should be responsible for retiree income and health care,” he said.

But the politics of Social Security and Medicare are so touchy that he expects Congress to keep avoiding the issue until a crisis occurs.

A survey this year by MetLife found that nearly four in 10 American workers expect to rely solely or mostly on Social Security in retirement, and another 30 percent expect Social Security to be an important source of retirement income.

Thirteen percent of working Americans don’t think Social Security will be available for them in retirement, though for the most part that has not prompted them to save more themselves.

Baby boomers are in the worst shape, as they are now at or approaching retirement age without adequate savings.

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