Magazine article Insight on the News

Social Security's Bad Deal for Black Retirees

Magazine article Insight on the News

Social Security's Bad Deal for Black Retirees

Article excerpt

Is Social Security racist? By yesterday's definition of racism, the answer is no. For all its failings, Social Security was concocted in 1935 with honorable intentions. Rescuing the elderly from poverty regardless of race) is an idea to which only the fliintiest would object.

But, by today's definition, a negative "disparate impact" on minorities trumps even the most pristine motives. Perhaps Social Security should be investigated by the Equal Employment Opportunity Commission.

As it is, Social Security is a legalized pyramid scam built atop unstable demographic sands. It threatens to collapse once the baby boomers retire and generation-Xers begin carrying them around like so many passengers on an overworked camel.

Worse yet, Social Security is a bad deal for black Americans, despite FDR's noble objectives. The key issue is the troubling disparities in black and white life expectancies. Because blacks tend to die sooner than whites, they often find themselves outlived by their benefits.

The National Center for Health Statistics reports that black boys born in 1990 can expect to live to age 67. In contrast, white boys born that year have a life expectancy 72.9 years. While black girls born in 1990 can expect 75.2 years of life, white girls can look forward to 78.8 years on Earth.

Since older retirees collect more benefits from those who pay into the system, Social Security essentially transfers money from working black men and women, who die earlier, to older white women who live the longest. This quickly raises a fundamental question: Given that the retirement age will increase to 67 by the year 2027, is it fair to expect young black men to support a scheme that will not provide them pension benefits until about the time they can expect to die?

Compounding this problem, a lower proportion of blacks tend to enroll in college than do whites. In 1995, 51 percent of black high-school graduates went to college, while 63 percent of whites began their postsecondary studies. Consequently, more young blacks begin their working lives earlier than young whites and thus start paying into Social Security sooner. Nonetheless, as the Cato Institute's Michael Tanner explains: "Because Social Security benefits are based only on the last 35 years of an individual's work history, they win receive no additional benefits despite paying taxes for more years'

Many Americans have begun to brace themselves against Social Security's impending turmoil by investing in mutual funds, 401(k) plans and other financial instruments. Most likely because of average incomes below those of whites, black Americans lag way be-hind in this area.

The Rand Corp. …

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