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Social Security Reform Thursday: Week Twenty-Five -- Latinos and Social Security.


Thursdays are good days for reform, because they fall between Wednesdays and Fridays.

That's why WILLisms.com offers a chart or graph, every Thursday, pertinent to Social Security reform.

This week's topic:

Latinos and Social Security.

As Ian Vásquez explains, Social Security reform would disproportionately benefit Latinos:

The current system has failed Hispanics and has failed to reduce poverty in old age among Hispanics. It has made them extremely dependant on Social Security for their pension benefits, putting them in a very precarious situation.

About 24% of Hispanics over the age of 65 live below the poverty line, compared to about 9% of whites and about 25% of blacks. Hispanic families have few assets. The median Hispanic household has about $1,200 in financial assets and less than half of such households were net savers in 1998. The fact that the current system does not allow for the creation of wealth and instead diverts income into the payroll tax, which is the biggest tax that most Hispanic households pay, is holding back Hispanics.

Let's take a look at some facts.

I. Latinos have a longer life expectancy than African-Americans or Anglos.


II. Latinos are less likely to save for their own retirement than other ethnic groups.


III. Elderly Latinos are less likely to receive Social Security benefits than other ethnic groups.


IV. Elderly Latinos are more likely to depend on Social Security just to "get by" than other ethnic groups.

National Council of La Raza (NCLR):

*Among Latinos who receive Social Security benefits, 75% of their income comes from Social Security.

*Social Security is the sole source of income for 31% of elderly Hispanic couples and 49% of unmarried elderly Latinos. This is true for only 11% of elderly White couples and 25% of elderly White singles.

That being said, because fewer Latinos are eligible for Social Security benefits (even though many of them have paid into the system their entire working lives), aggregate dependence on the program is not that much greater than other ethnic groups.


Now, take all this information and put it into the context of the looming Social Security crisis. The consequences of the crisis: major slashing of benefits and/or a major tax hikes. If there is no reform, Latinos, who already rely on Social Security for so much of their retirement existence, would be hardest hit by benefit reductions. Meanwhile, personal accounts have the opportunity to empower the Latino community, giving workers a chance to earn, accumulate (through compound interest), and pass on real assets.

Some left-wing groups, such as the Center on Budget and Policy Priorities (CBPP), argue that Latinos are better off without reform and without personal accounts. Their assertions are hardly worth addressing in any great detail, as their findings are part and parcel of the same reactionary 1930s dogma that has taken over much of the Social Security debate. Liberal groups love to repeat the line that Social Security is an insurance program that has successfully kept millions of elderly Americans out of poverty. That may be true to some extent, but there are still far too many people living in poverty in spite of (and maybe even because of) the Social Security program.

The current Social Security system is a failure for Latinos. It has not kept Latinos out of poverty. It does not encourage savings. And the rate of return for continues to diminish for the average Latino:


Social Security, currently, is a bad deal for Latinos. The relatively high payroll tax rate prevents lower- and middle-income Latinos, in particular, from developing a family nest egg. U.S. Treasurer Anna Escobedo Cabral explains:

My father worked hard all his life and paid into the Social Security system. He filed the paperwork to begin receiving benefits, but he died before receiving a single check. We came from a modest upbringing. My father could never really get ahead enough to save money. Social Security was all he would have had to support himself in retirement. He would have given anything to be able to pass those funds on to his children. Instead, the government kept that money.

Under President Bush’s proposal, my father could have passed on his Social Security personal account to his children and our family could have had a nest egg. Personal accounts would allow a younger worker the option to put a portion of their money into a conservative mix of bonds and stocks. That money would have an opportunity to grow over time at a rate greater than the current system can deliver. For example, someone who earns an average of $35,000 a year over their lifetime could expect to have nearly $250,000 saved in an account upon retirement.

Meanwhile, the Latino population is young and is expected to grow rapidly over the next few decades.


Cabral notes:

As the youngest, fastest growing population group in America, Hispanics would directly benefit from the option to save a portion of their payroll taxes in a conservative mix of bond and stock funds. Unlike paying into the Social Security system, personal accounts ensure that your Social Security taxes are saved to pay your Social Security benefits, not spent on other government programs.

Clearly, Latinos have a great deal at stake here. If and when the Latino community becomes fully invested in the President's Ownership Society, it is hard to imagine this GOP-trending group not becoming an entrenched part of the Republican political base over the long-term.

Stopping the raid on the Social Security trust fund surplus which exists over the next dozen years, creating personal accounts for every worker, is a step in the right direction. Let's do it.

Stop The Raid, Grow My Account


Previous Reform Thursday graphics can be seen here:

-Week One (Costs Exceed Revenues).
-Week Two (Social Security Can't Pay Promised Benefits).
-Week Three (Americans Getting Older).
-Week Three, bonus (The Templeton Curve).
-Week Four (Fewer Workers, More Retirees).
-Week Five (History of Payroll Tax Base Increases).
-Week Six (Seniors Living Longer).
-Week Six, bonus (Less Workers, More Beneficiaries).
-Week Seven (History of Payroll Tax Increases).
-Week Seven, bonus (Personal Accounts Do Achieve Solvency).
-Week Eight (Forty Year Trend Of Increasing Mandatory Spending).
-Week Nine (Diminishing Benefits Sans Reform).
-Week Ten (Elderly Dependence On Social Security).
-Week Eleven (Entitlement Spending Eating The Budget).
-Week Twelve (Benefit Comparison, Bush's Plan versus No Plan).
-Week Thirteen (Younger Americans and Lifecycle Funds).
-Week Fourteen (The Thrift Savings Plan).
-Week Fifteen (Understanding Progressive Indexing).
-Week Sixteen (The Graying of America).
-Week Seventeen (Debunking Myths).
-Week Eighteen (Debunking Myths).
-Week Nineteen (Reform Needed Sooner Rather Than Later).
-Week Twenty (Global Success With Personal Accounts).
-Week Twenty-One (GROW Accounts: Stopping The Raid).
-Week Twenty-Two (Millions of Lockboxes).
-Week Twenty-Three (Support for Ryan-DeMint).
-Week Twenty-Four (KidSave Accounts).

Tune into WILLisms.com each Thursday for more important graphical data supporting Social Security reform.

Posted by Will Franklin · 21 July 2005 01:28 PM


Great post. I urge everyone to take a look at Social Security today, and look how it will appear in our future. Not good.

Posted by: Jose at July 21, 2005 02:05 PM

Will: what the hell?

Posted by: Steven D. Rivas at July 22, 2005 04:42 PM

People need to be informed. The people out there who are opposed to reform don't have the facts! It is so important to future Americans that reform happens ASAP! The Nodometer needs to be on a billboard allowing the American People to see the truth!... The Democrats and Republicans should keep policy out of politics! (so to speak) This is the future retirement for young adults that WE CAN change together IF... Partisan politics are set aside!...
For better or worse Republicans and Democrats must work together and put the partisan junk in the trash! Reform is the way our future generations can benefit!

Posted by: Zsa Zsa at July 23, 2005 09:19 AM