"Social Security is not in crisis. We're going to have to make some modest adjustments in order to strengthen it. There are some fairly modest changes that could be made without resorting to any newfangled schemes that would continue Social Security for another 75 years, where everybody would get the benefits they deserve."
-Barack Obama, Aug. 18, 2010
Holy crap, where do I start? Now that I’ve taken my jaw off the floor, I can write my thoughts on this bombshell delivered by President Obama yesterday. You know, it’s one thing when someone says something wrong simply because they had incorrect information. But, it is quite another when someone just outright lies to your face. Or maybe he’s just high. If that’s the case, I’ll have what he’s having. That stuff must be good.
Here’s the thing…of all the people in these United States, Generation X is going to get hit the HARDEST of anyone when it comes to the Ponzi scheme known as Social Security. If no changes are made to the current Social Security program, most estimates say it will be out of funds in 2037, which is great news for me. I will be 60. Currently, there are about 3.2 workers for every recipient. But, the boomers are retiring by the thousands each month, and that number will probably be more like 2 workers for every recipient in as little as 25 years. I am confident I will never see one dime from a Social Security payout, even after years of paying into the system.
Ok, there are a number of different layers to this issue. Each one of them must be faced by our generation, because the boomers are retiring and have done nothing about this coming craziness during their entire lifetime. It really frosts my cookies that the boomers have not only allowed our government over the past 40+ years to get away with the legislation they’ve passed, but they’ve voted into office over and over again the same elitist political crooks that perpetuate the status quo. But, that’s a blog for another day.
I want to begin with the very concept of Social Security. It was signed into law by FDR in 1935 as part of the New Deal. The idea behind it being-old people and the disabled needed to have a source of income. At the time of the depression, over half of the elderly in the United States did not have any retirement income or savings. So, once they stopped working there was no money. This law’s constitutionality was challenged in 2 separate Supreme Court cases, but was upheld both times. Why? Well, FDR was such an elitist snob, he threatened and pressured the Supreme Court to the point that justices flipped positions or retired…allowing FDR to stack the court in his favor. (If you have any interest in American history, I highly recommend you research 1900 thru 1939. It will blow your freakin’ mind. Between the bankers getting the Federal Reserve Act passed, the General Education Board, the shady passage of the 16th and 17th Ammendments, and the Presidency’s of Woodrow Wilson and FDR…I think those 40 years saw a systematic change in the course of this nation’s history. During that time, we completely abandoned the ideas of the founding fathers, and began a course of crony capitalism and socialism. The problem, of course, is no one in our country knows anything different. We are all used to the traditions of Social Security, Welfare, Income Taxes, government controlled education and the Federal Reserve. Yet, most of us don’t realize these things are less than 100 years old…they haven’t been around since the beginning. These are things we can change…no matter what our political leaders tell us.)
Now people, I understand that some elderly and disabled need assistance. I am not a cold hearted individual. But, the reasons charitable organizations and churches get tax exempt status, is because they are places that are designed to provide these services. That is the reason you get a tax deduction when you donate! We have a charitable safety net set up in this country for individuals who need it. Americans are generous givers, when their money is not forcefully taken from them. But I ask you, is it Constitutional to automatically take over 6% of your income every paycheck (with your employer matching) for the promise of some pitiful monthly payout allowing me to live at the poverty level until I die? I have the read the Constitution many times, but I missed the part that says the federal government had the right to withdraw money from my paycheck so I can live off the government when I retire. We supposedly live in a free country, where you have the ability to succeed OR fail. You have the right to save, invest, or spend. But, if you spend all you make (or even more than you make) and didn’t plan for retirement, why is it someone else’s responsibility to take care of you? This concept should absolutely make your blood boil. But, the Social Security system has conditioned us to believe the great and powerful government will take care of you when you die, because they are taking money out of your check every week.
Now, let’s move on from the simple concept of Social Security, and move on to the details. The law is in place, it is a reality. We have never known anything different. But, do you know what happens to that money once it is taken out of your earnings? From your very first paycheck until your very last, a percentage of your earnings is withheld via the FICA (Federal Insurance Contribution Act) payroll tax and deposited into a general fund. It is a pay-as-you-go system. So, instead of you contributing to an account just for you and earning interest, your contributions go into a general fund and get paid to people currently receiving benefits. Hence, the current 3.2 workers to 1 recipient ratio. Now, historically, more is being paid into the system than is being paid out, so a surplus fund was established. The kicker is, instead of leaving that money alone, the Secretary of the Treasury can use it for ANYTHING. So, this program works more like an insurance plan. The contributions you make via your earnings are like a premium payment on an insurance policy that will pay out once you can’t work anymore. It is not retirement investing. The way the system is set up, politicians have access to this money to spend on anything they want instead of saving or investing it. This is why the program is a ponzi scheme. You take the investment of one person and pay it out as dividends to another while financing your own spending spree. But, eventually the money runs out. And the last investors (that would be us, Generation X) will be left holding the bag, with not only no payout of dividends, but a complete loss of the principal investment. Now, in 2010, this is the first year the system will pay out more than it takes in. This is why I say Barack Obama must be smoking something, because this is just simple math. For him to say this program just needs some minor adjustments is just a complete denial of reality.
Let’s have some fun with numbers. Talk of privatizing the program at least partially has been around since the Carter administration. Now, if there is anyone I trust less than government officials and politicians, it is big money bankers. But, the benefit of investing in the stock market over the past 6 decades has been proven. Money invested from the 1930’s to the 1990’s shows an average return on investment of about 10.5% on long term common stock investing. In other words, long term investors over that time could see an average rate of return on their investments at around 10%. So, let’s say the people that are currently drawing social security benefits would have put 6% of their income into a private investment retirement account instead of the general Social Security fund. I will use some general numbers to make my point.
Scenario A
Premise: Current American Age 65. Worked from the age of 18 to 65 (47 years).
Average annual salary over that time $20,000. 6% of income ($50 a month) invested into personal retirement account with a 10% annual rate of return.
Result: When this person retires, they would have a personal account valued at $646,000 (with a contribution amount of only $28,000 in your lifetime. This also does not factor in the employer match of your contribution.) This account will go to you or your family to use in anyway you see fit. You can just live off of the interest and never touch the principal, if you like, and leave the rest to your family when you die.
Scenario B
Premise: Current American Age 65. Worked from the age of 18 to 65 (47 years)
Average annual salary over that time $20,000. 6% of income ($50 a month) paid into the Social Security Fund.
Result: When this person retires, they would receive a monthly benefit amount of approximately $1,000. But when you die, the monthly benefit stops. No more benefits.
I don’t know about you, but I like Scenario A. And, keep in mind people, this scenario is with an average annual salary over your lifetime of $20,000. The money grows exponentially in your investments when your earnings increase. We are talking millions. But, if you increase your earnings to an average of say $50,000, your social security monthly benefit only grows to about $2,000 per month.
Remember, however, that these are current numbers. By the time Generation X retires, the fund will have no money. The government will have spent it all. We are currently in trillions of dollars of debt with a system that only perpetuates that spending and more debt. We are fighting expensive wars all over the globe, sending billions in aid to foreign countries, and taking on the expense of an out of control health care system. THERE WILL BE NO MONEY IN SOCIAL SECURITY FOR GENERATION X WHEN WE RETIRE.
So, where do we go from here? First step could be to start contributing at least 6% of your income to a Roth IRA or a company matched 401k. That would be on top of the 6% being taken from your check by FICA. But, the stock market is just as untrustworthy as the government. It is risky. So, we must demand that the Social Security system be dissolved. Yes, let’s currently pay out benefits to those who have paid into the system over their lifetime. But, for those of us in Generation X, we must demand the ability to opt out of the system and take that 6% to invest and spend ourselves. It could be the stock market, real estate, foreign investment, whatever you choose! I want freedom over my own earnings. The social security system just increases government power over me.
I wish President Obama would bring about real change we could believe in, instead of telling people what they want to hear. If you even mention changing Social Security, everyone over 50 gets their panties in a bunch. But, this issue is NOT going to bite them in the ass the way it will Generation X. If we do not demand real change now, the federal government will continue to take a percentage of your money every payday with no guarantee of ever seeing a dime of it again.
Obama will not do it. His family is busy taking vacations costing hundreds of thousands of dollars, while he continues to grow government and take away our economic freedoms each day. The establishment Republicans won’t do it. They love big government as much as the Democrats. If we don’t vote in people that truly understand personal liberty, we will never make this happen. Now is the time Generation X!Challenge the status quo. Get rid of these archaic politicians who have been ruining this country for decades.
Say goodbye to Harry Reid, Nancy Pelosi, Barney Frank, Lindsey Graham, Barbara Boxer, Diane Feinstein, Chris Dodd, Joe Lieberman, Chuck Schumer, Sam Brownback, Pat Roberts, John Kerry, Kit Bond...the list goes on and on.
We can start by electing Rand Paul to the United States Senate. Then…Ron Paul for President in 2012!
Our generation depends on it.
