Inheritable Accounts to Be an Empty Promise for Many Black Men
For Immediate Release: February 9, 2005
Contact: Debi Kar, 202-387-5080
Many African American men will not be able to pass along to heirs the private accounts that they would receive under President Bush's Social Security plan, according to a new analysis from the Center for Economic and Policy Research. In order to ensure at least a poverty-level benefit, which the Presidents plan would require, workers will have to use much of the money in their private account to purchase an annuity. An annuity expires at ones death and cannot be passed on to heirs. Since Plan 2 from President Bush's Social Security Commission (the one he cited as the likely basis for his eventual proposal) would cut benefits substantially from their currently scheduled levels, many African Americans will earn benefits that are below the poverty line even forty or fifty years in the future and will thus have to dedicate their entire private account to an annuity.
President Bush has promoted his Social Security plan to the African American community by claiming that it will benefit them, since African Americans, and especially African American men, have shorter life expectancies than whites. Therefore they collect Social Security retirement benefits for fewer years on average than do whites. The President has repeatedly said that private accounts would create wealth that African Americans could pass on to their heirs.
However, if African American men continue to have low earnings, then his plans requirement that they annuitize enough of their benefit to ensure a poverty-level income will leave many African American men in the same situation as with Social Security. They will have a benefit that will only last as long as they live and will have nothing left from this benefit to pass on to their children.
The basic issue is the shorter lifespan of African Americans. It is not possible to use the same pool of money both to ensure a lifelong income stream and also to provide a bequest to heirs. The best way to ensure that African Americans benefit equally from either Social Security or a system of private retirement accounts is to address the factors that lead African Americans to have shorter lives.