Committee on Ways and Means, Subcommittee on Social Security, 2-2-99 Testimony

Statement of Richard K. Anderson, Sr., President
Anderson Financial Services

Testimony Before the Subcommittee on Social Security
of the House Committee on Ways and Means

Hearing on the Impacts of the Current Social Security System --
Impact on Today's Children

February 2, 1999

Good Afternoon Mr. Chairman and Distinguished Members of the House Subcommittee on Social Security.

My name is Richard K. Anderson, Sr. I am President of Anderson Financial Services in Brooklyn, New York. I am a graduate of Medgar Evers College of The City University of New York and I am currently on the faculty of the School of Continuing Education where I teach Personal Financial Planning Basics and Mutual Fund Investing Basics. I am the producer and host of "Anderson's Biz Kids", a public television show which showcases teenage money managers and entrepreneurs as well as a frequent guest speaker at the New York Stock Exchange Teacher Workshops. Professionally, I am a member of the Institute of Certified Financial Planners, the American Society for Training and Development and the World Future Society. I am also a trustee of the Securities Industry Foundation for Economic Education.

I am here to tell you today that when it comes to saving and investment education, the nation's 50 million plus youth in grades K-12, have been largely ignored. They have been ignored primarily because many parents and society still believe the old notion that children should not have to worry about anything but school, playing and being young. Consequently, by the time our youth are old enough to take an interest in savings and investment, it is already too late. Many of them never catch up and live their entire lives thinking that somehow, when the time comes, something called social security will take care of them.

A nationwide survey conducted by Lewis Mandell, Phd., an economist and researcher, looked at 12^th graders' level of knowledge within four areas: income, money management, savings and investment and spending. The survey results underscore serious concerns about young people's ability to make educated financial decisions once they are out on their own. I find this alarming because it will most certainly translate into the same condition in adulthood.

Let me pose this question, who will take care of the financially illiterate in their old age? There is serious concern about whether the current system of social security will still be around for our children. Therefore, we must realize that financial security at retirement, doesn't just happen. It takes planning, commitment, and yes, money.

Let me share some facts with you ...

At the beginning of the century in the 1900's, half of all Americans died before the age of 50. The life expectancy for men was 46 years. For women, 48 years.

By 1935, when the Social Security Act was conceived, the life expectancy for men had risen to 60 years. For women, it was 63.

In 1945, there were only 771,000 retirees collecting social security. In 1946, only half of Americans could expect to live to age 67. In 1999, more than 50% of Americans will survive through the age of 74 and there are currently more than 35 million people collecting social security.

As you can see by these statistics, when Social Security was conceived, most potential recipients were expected to be conveniently dead and buried before their social security ever kicked-in. Few Americans imagined that the program would be asked to support millions of older people. Based on current projections, there will be 76 million people on social security by the year 2045 when my son, Richard, turns 51.

Yes, people are living longer lives, which means that they are also spending more time in retirement. A man who retires at age 65 can expect to live to at least 83 years old. That means that he will be spending, minimally, 18 years in retirement. A woman who retires at age 65 can expect to live to at least 88 years old. That means that she will be spending at least 23 years in retirement. Those are the current statistics. Who knows what the life expectancy will be in Richard's lifetime or your children's. They may routinely live to be 100 or well past 100. Scientists are already projecting longer lives due to better technology and medical advances. As a result, our children may live half their lives in retirement. Let's face it, retirement has become an expensive process and the longer the retirement, the more expensive it becomes.

What can we do to address this looming crisis? The answer, obviously, is that people must begin to plan their retirements better and earlier. Education of our young about the necessity of planning for retirement must also begin at an earlier age. I don't know about you, but it saddens me to know that less than half of all Americans have put aside money specifically for retirement. In 1993, of those who had 401(k) coverage available, one third did not participate. America's workers, in general, have a very limited degree of knowledge regarding retirement planning and saving. Because of this lack of knowledge and lack of planning, most Americans are not aware that social security accounts for about 38% at best, of the average retiree's pre-retirement income. The rest must come from other sources. Unless we begin to educate the next generation early about the value of investing and saving, those other sources will never materialize.

The crisis is upon us and only a concerted and committed effort to educate the nation, especially our youth, about saving and investing can avert a disaster. Therefore, I urge this committee to seriously consider making the introduction of saving and investment education a part of every school curriculum. Thank you Mr. Chairman.