Florida Sen. Marco Rubio’s proposal to allow parents to tap Social Security benefits early to pay for parental leave has a number of prominent cheerleaders—chief among them White House adviser Ivanka Trump—but investment advisors are not cheering.
Rubio’s bill would allow both parents to apply for Social Security benefits early to finance leave after having or adopting a child. According to Rubio’s analysis, the early benefits will pay for two to three months of leave and will only delay Social Security benefits at retirement by three to six months.
But the proposal has drawn fire from most investment advisors and financial planners interviewed by Financial Advisor. They believe the proposal would be devastating to Americans’ personal retirement planning and to the Social Security Administration as a whole.
“I’d absolutely be concerned about this, as it presupposes a benefit that might never get paid for,” said Dennis Nolte, a financial planner with SeaCoast Bank in Oviedo, Fla.
Nolte jokingly referred to the Rubio proposal as a Ponzi scheme.
“What if someone never returned to the workforce to continue paying into Social Security?” Nolte asked. “Drawing down benefits early, in a system that already needs to be tweaked to reduce future benefits to stay solvent, is not a great idea.”
The Independent Women’s Forum (IWF), the conservative group that created the blueprint for the senator’s new proposal, projects the impact on Social Security would be small, with about two million parents tapping $7 billion in benefits for parental leave every year. Currently, the Social Security pays out $950 billion in retirement and other benefits annually. Both IWF and Rubio argue that Social Security has years of experience paying out funds out early in disability and survivor benefits.
While even the Urban Institute, a liberal think tank, doesn’t quibble with that analysis, it said the proposal “could undermine Social Security’s ability to ensure basic retirement security for all Americans.” The group also worries that the paid leave program could lead to other non-retirement drains on the system, such as programs that allow Americans to borrow early to pay for student loans or adult education.
"Shifting money from retirement to parenting leave gives immediate help now at the expense of the future,” said Chris Chen, a Boston financial planner. “The expense will be born by the beneficiaries in retirement. In an age when we repeatedly bemoan a retirement funding crisis, by the time the benefiting women get to retirement age, 20 years or more in the future, who will remember that it was Marco Rubio who introduced this gem?”
Under the proposal, expectant parents would be required to apply to the SSA and provide documentation after the birth or adoption of a child. SSA benefits would be paid in two monthly payments.