• This is a partial transcript from "Your World with Neil Cavuto," April 27, 2006, that was edited for clarity.

    NEIL CAVUTO, HOST: The folks at AARP were fired up over a discussion we had earlier in the week over the organization's decision to now market mutual funds. This is the same AARP that appeared dead-set against the president's plan to allow a portion of Social Security funds to be invested in the stock market. So, was that hypocritical?

    Not according to my next guest.

    Here now from the AARP is Nancy Smith. Nancy is a vice president of investment services for AARP Financial.

    You and I were kind of nuancing the nuances, but it appears you're being a hypocrite.

    NANCY SMITH, VICE PRESIDENT OF INVESTMENT SERVICES, AARP FINANCIAL: Not at all. I just don't know where you get that, Neil.

    (CROSSTALK)

    CAVUTO: Well, here's where I get it.

    The AARP position on the president's plan was that Social Security, as you said, was an annuity and it shouldn't be invested in the risky stock market.

    SMITH: Right. People need to count on it for their lives once they get retired. It's the one thing that you can say, no matter what else happens to my other investments, at least I will have Social Security there every month for as long as I live.

    CAVUTO: Even though it's broken?

    (CROSSTALK)

    SMITH: And you don't want to change it. You don't want to — well, the issue of how to fix it is a completely different issue. But what I'm getting to is that the pundits you had on your program — I know you weren't there a couple days ago — they spread so many misrepresentations about AARP and what they were about that I'm glad you invited me on to set the record straight.

    (CROSSTALK)

    CAVUTO: All right, let me tell you what was said. Here — at the time, the AARP position on the stock market was expressed by John Rother a policy director, who said: "Partial privatization of Social Security would risk a rerun of the nation's experience with 401(k) accounts, where a majority of people take money out prior to retirement."

    Now, it's bad for the government to do that, but it's OK to the AARP to do it?

    SMITH: You're missing the whole point.

    What AARP stands for is to say, for every American, when you retire, you're going to want to make sure that you have at least some money to cover your bills, and that money is there no matter what happens in the market.

    The other thing AARP is saying and AARPFunds.com is saying is, in addition to your Social Security, you're going to want to invest money for your retirement, so that you have more to spend. And for many Americans, who go to sleep at night worried about, what am I going to do if I live for 30 years in retirement, then you're going to need...

    CAVUTO: Nancy, for a lot of people, Social Security is it. That's all they have.

    So, what's to stop these people from saying, all right, I'm 40, 50 years old; I think the market, over time, is going to give me a better return?

    I'm not saying all the Social Security dough, just part of the dough invested in the market. Now, you were dead-set against that. Yet, your organization now is touting these funds. So, methinks that you knew you were planning this with the funds. You didn't want competition from Uncle Sam. You want your cake and eat it, too. Tell me I'm wrong.

    SMITH: You are wrong. I hate to break the news to you, but you're very, very wrong.

    What AARP is trying to do is simplify investing by offering three asset-allocation funds, that you get an entire portfolio in one fund.

    CAVUTO: I think it's a great idea.

    (CROSSTALK)

    CAVUTO: Nancy, I think that's great. I'm not against what you're doing.

    SMITH: Oh, that's great to hear.

    CAVUTO: I'm just saying, why not take Social Security, part of that money, give them the same fund choices, and let people decide, especially younger people, who are not too confident in Social Security's future, and give them the same thing you're telling your members?

    SMITH: OK, Neil, but what happens if you make a mistake, and you get your private account money, and you make a mistake, and you don't have that money to count on when you retire? This whole debate...

    CAVUTO: What's a bigger threat now, Nancy, having that money or losing it altogether in a system that has fewer people paying in for more people taking money out?

    (CROSSTALK)

    SMITH: It's a bigger risk for people to give up something that is a sure thing.

    (CROSSTALK)

    CAVUTO: It's a bigger risk — it's a bigger risk, Nancy, not doing anything.

    SMITH: Well, we will just have to agree to disagree about that. But the truth of the matter...

    (CROSSTALK)

    CAVUTO: But you are going to make money on these funds, the same opportunity you wouldn't give the government to fix a program that's broken.

    SMITH: Well, let me tell you this. What AARP does in their association with AARP Funds, they're getting $5 for every $10,000 that's invested in these funds. And that money, when it goes to AARP, gets put right back into programs for people who are over 50.

    CAVUTO: Nancy, you're misunderstanding what I'm saying. I love what you're trying to do for older folks, 50 and over. I'm getting darn close.