Polls consistently show the skepticism of young people regarding the viability of Social Security. They may not be able to define precisely why Social Security may not be around when they retire, but they feel it in their gut. They are wrong about the availability of Social Security. It cannot go away for political reasons, but it can be altered almost beyond recognition. Young people are rightly concerned about that eventuality.
In order to understand the intrinsics of Soc. Sec., let’s go back to the beginning. It shocks some folks to learn that S.S. is basically a Ponzi scheme, or should we say scam! Ponzi schemes promise future benefits, which are not produced from created wealth, but are rather returns of money extracted from earlier participants. That’s what SS is, just like a chain letter, and with the same fatal flaw.
SS worked fine in the earlier years, starting in the 1930s, because there were over 30 people paying payroll taxes, for every one drawing benefits. Fast forward to the present time, and we find a ratio of less than 3 to 1, and soon to be 2 to 1. Why, a much lower birth rate and 50 million abortions since 1973. This ratio is unsustainable, and the reason SS is predicted to go belly up in 20 years or so. That is, unless adjustments are made.
One of the myths propagated by the government, concerns a fiction called “your Social Security account”. It does not exist. All money going in and coming out of SS, is part of a general fund. [Mr. Ponzi, call your office]. If an insurance company operated its life insurance accounts, that way, executives would be heading to jail. There is no contract between the government and the taxpayer, just a promise, and we all know how reliable that is. So what can be done to salvage the SS system.
Right now our benevolent government, already in hock for trillions in debt and future liabilities, is considering at least four possible solutions. First, increasing the payroll tax. Second, raising the retirement age for drawing benefits. Third, decreasing the benefits for future retirees. And fourth, subjecting individual benefits to a means test.
Obviously, each of the above involves serious political dangers. That is why each Congess, pontificates extensively about the problem, but then kicks the cam down the street for the next Congress to take action!
One other partial solution, would be for a private, discretionary segment of SS to be available. The individual could decide how to invest those funds. Guess what? Politicians don’t like that idea, because they would lose control of part of SS. Even worse, for the politicians, when citizens realized how profitable the savings portion could be, there would be clamor to expand the program.
Politicians retaliate by stating that you can’t trust individuals to make wise investment decisions. Look how the stock market can act like a roller coaster. This argument is disingenuous. Who said anything about stocks? Even the safest blue chip bonds, would have a yield 3 times what SS generates!
What we need to tell baby boomers before reaching retirement, is to provide for your own retirement, exclusive of SS. Unfortunately, the boomers do not have a good record of saving. Many have no savings, other than employer plans, which are good. Along with no discipline to save, many boomers are up to their eye balls in debt. The first order of business, before retirement, is to get rid of all debt. It ain’t easy but it needs to happen.
Finally, if boomers develop a retirement program, away from SS, they are going to have to become prudent about where they put their money. First, they need to realize that the government is gradually stealing our money. The process is called inflation, and all signs point to it increasing. One sign is the steady erosion of the value of the dollar. All of our assets, held in paper money equivalents, are rotting away. Yet the government continues to have the nerve to publish inflation figures that do not include food and energy prices!!
The boomers need to research investment opportunities which include foreign countries, commodities, and precious metals. They need to ignore anything the government states, as well as experts in private industies that shill for the government. Caveat emptor is alive and well.
Dick Brooks
[...] And finally, over at WhereIStand, Dick Brooks provides an overview of the government’s four proposed plans to fix Social Security. In addition to this insight he offers Boomers some intriguing advice: “The boomers need to research investment opportunities which include foreign countries, commod… [...]