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Feb 4, 2005 7:50 am

Social Security Reform Clarification

Today the Washington Post reported this:

"[W]orkers who opt for the accounts would lose a proportionate share of their guaranteed payment from Social Security, plus interest equal to the amount that money would have earned if the government had invested it in Treasury bonds. They would recoup those lost benefits through their accounts if their investments realized a return equal to or greater than the 3 percent earned by Treasury bonds currently held by the Social Security system.

"The Washington Post incorrectly reported Thursday that the balance of a worker's personal account would be reduced by the worker's total annual contributions plus 3 percent interest. In fact, the balance in the account would belong to the worker upon retirement, White House officials said. [Emphasis added.]

"'Individuals get to keep everything they set aside in personal accounts, plus the increased rate of return they'll realize on their investment,' White House spokesman Scott McClellan said. 'So to suggest otherwise is wrong. It is the individual's account, and the government cannot touch it.'"

However, this money would be administered by the government, invested in government-selected securities by managers under contract to the government, and then doled out to retirees through a government-controlled annuity. Those details were not challenged by the administration spokesman.

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