I’m Still Counting on Social Security – How About You?
December 2, 2008 by Mr. GoTo
Filed under Social Security
If you are like me, you have read and heard many people proclaiming that Social Security will disappear and not be there when it is our turn to retire and collect benefits.
I don’t believe it. And even though I am a strong proponent of being responsible for your own financial future, I am counting on Social Security being there for baby boomers and beyond.
This is Why Social Security is Here to Stay
Baby Boomers won’t let Social Security disappear
If Congress were to let Social Security unravel, baby boomers would vote them out and replace them with politicians friendly to the AARP. Older folks vote in huge numbers. The AARP is a strong advocate of Social Security. At 35 million members, the AARP is ten times the size of the National Rifle Association. Its $800 million budget is five times that of the U.S. Chamber of Commerce, which is our country’s largest business lobbying group. As we boomers continue to age, the membership and voting clout of the AARP will only increase. The AARP almost by itself stomped out the Republicans’ plan to privatize part of Social Security.
Social Security will need to be solid and secure until the last of the boomers moves through the system.
Younger Generations Will Need Social Security
Even if you think that only boomers are concerned about Social Security, think again. Post-baby boomers in the the younger generations will also need Social Security.
Using me an example, if I wait until age 70 to claim Social Security retirement benefits, my wife and I will be entitled to receive a combined retirement benefit (in today’s dollars, using current calculations) of $4600 monthly. Now instead assume that Social Security is not there and I needed to replace that $4600 per month with investment income. Using an annual retirement withdrawal rate of 4%, I would need a retirement fund of $1,380,000 just to replace those Social Security retirement benefits.
I doubt that many of you are confident that you will have a fund in excess of $1 million (in today’s dollars) just to replace the Social Security benefits that you assume won’t be around. Even if you had that confidence last year, how about after the 40% market drop that we experienced in 2008. There has been a significant and likely permanent shift in investment confidence levels at all generational levels. The long anticipated market returns of 10%-12% annually are gone, perhaps for our collective lifetimes. We actually need to do better than that to recover from the recent market declines. Because of that, all but the wealthiest working adults of all ages must look forward to the continued existence of a Social Security retirement system. Having a multimillion dollar retirement portfolio is nice to think about and plan for, but not many get there.
Social Security Fixes are Available
Even if you understand that our Social Security system is a good thing after all, you may still doubt whether it can be fiscally sustained even with the good intentions of all working adults. True, the Social Security system needs repairs but many experts believe that the actuarial and funding crisis has been overstated and over-hyped. (Of course, Medicare is a separate and more severe problem.) The misinformation about the stability of the Social Security Trust Fund is characterized by the Center for Economic and Policy Research as a “solution in search of a problem. ”
There are different options available to improve the actuarial health of the Social Security system. They include delaying the retirement age or increasing the cap on Social Security earnings. Even immigration reform could inject millions of younger workers into the system, boosting contributions.
What Does This Mean to Baby Boomers?
I suggest that you not automatically discount or exclude Social Security as part of your retirement plan. Otherwise, you may end up taking excessive risk as you attempt to replace Social Security income with retirement investments. That could blow up in your face.
I will need more than Social Security but I expect it to be there. I am frequently checking the online benefit estimator and paying close attention to my annual Social Security Statement. How about you?
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Hmm. Yes it will be there for the baby boomers, but I have already gotten what will be a thing of the past out of my plans. Though I still pay for it. Can I opt out? I’m 23, I’ve served my country in the Army, graduated college, and the best job I can find after nearly three months is a part-time job with a bunch of high school graduates.
I’ll take care of my own retirement. The government has proven it can’t handle what money I have taken out of my checks.
Oh, I thank the Baby Boomer-run government for the TARP and $875m+ tax bill on top of previous deficits (note the sacrasm).
But really, have a nice, early retirement to most Baby Boomers. Can I have a full-time job now?
Are you kidding me? You are depending on social security just because voters aren’t going to allow it to go away? Who is actually going to PAY for the 77 million retiring baby boomers? That makes about as much since as voting “free money for everyone!” If the government can’t handle managing its own finances, why should it be allowed to handle mine? Also what about the incentive to make money so you don’t end up in a government run “Boomer camp”? The Boomers were the true ME generation, the most spoiled and greediest group around! Why should I pay extra taxes to support them?!?
Agreed, and no, you can’t opt out. You used to be able to opt out when Social Security was first started, but it has now become a monster that chews through 12% of each paycheck you earn (you may not see the 6% that your employer pays, but it’s still a payroll expense directly tied to your paycheck), regardless of any financial difficulties you may have.
I personally would like to see Social Security retained, but only as a disability program. Persons unable to work due to illness or advanced age should certainly be cared for. However, healthy and well-heeled sixtysomethings who want to quit their desk jobs to have fun should save and use their own money for that privilege. They should not be drawing income from the paychecks of younger people who may not even live to see 65 because they can’t afford health insurance and other necessities. That being said, we need to retain some benefits for all who paid into the system, but we do need to start rolling this monster back.
Unfortunately, this blogger is probably right – the AARP is the most powerful lobbying organization in America, and if you try to take one Social Security check away from one millionaire retiree, then they are going to accuse of you trying to throw all America’s grandparents out into the street in one fell swoop. Don’t let them get away with this – your necessities are as important as anyone else’s and YOU earned those dollars coming out of your checks, not the AARP.
There is talk about eliminating the first 20K of earnings from SS taxes. I hope this passes, and I hope that they apply the same witholding practice used for incomes over the current cap (once you hit the income cap, the taxes disappear from your subsequent paychecks). I think part of the problem is that younger people don’t really think about how much this is costing them – but once they have the now-you-see-it-now-you-don’t experience, it should hopefully register on a gut level and get them fighting back against these lobbying groups.
Social Security will be around for a long time, unless the economy actually fails and the government defaults which could actually happen. The current economic crisis is not due to the “baby boomers” it is due to criminal activity in the mortgage industry (loans to those who could not pay), to criminals in the investment ratings agencies (giving AAA ratings to “junk” investments), to criminals in Wall Street investment firms (packaging and reselling “junk” investments as if they were AAA rated when they knew with certainty that they were junk), to criminal activity in the US government (encouraging lenders to give loans to minorities who didn’t have a prayer of being able to repay), to more government criminal acts (spending like drunk sailors and giving tax breaks to the wealthy while the country went bankrupt), to government criminal activity that allowed and encouraged corporations to ship American jobs overseas (that’s where Sue’s job is), etc, etc, etc…… Some of the people involved were baby boomers, BUT 10’s of millions of the people being wiped out by the economic collapse ARE baby boomers.
The current crisis demonstrates in no uncertain terms why Social Security is so important. The markets are full of greedy criminals who only care about making money for themselves and their rich buddies. They’ll take us on short rides with them so we can make a little money for awhile (while they are making a mint using our money) and then WHAM, they steal our money and run, laughing all the way to the South Pacific islands and their Swiss Bank accounts.
Social Security only needs to have the payroll tax increased to say 8% (it’s currently at 6.7%) in order to be rolling in dough. That is a cheap price for an almost guaranteed income in retirement. DO NOT think of Social Security as a retirement plan – it isn’t, think of it as insurance – and all during your working years, scrimp, live frugally, and save every dime you can just as your grandparents did and when you turn 65 or so you’ll do OK most likely. IF the market takes away your private investments just before retirement as it has done for millions of people this past year, then at least you’ll have Social Security and you can perhaps live in a camper trailer somewhere. That’s better than living in a cardboard box or under a bridge which is all that the market can guarantee.
The stock market is a ponzi scheme. If 1,000,000 people buy a stock today at $100 each and then try to sell them tomorrow, the first few people will get more than they paid due to rising price, the next batch will get about what they paid, and the rest will get less than they paid with the last 10% getting essentially nothing for their stock. That’s because the stock market is a ponzi scheme that depends on an endless supply of suckers to keep buying into the ponzi scheme.
Just think, your retirement plan, whether pension or 401k, is invested in nothing more than a ponzi scheme! HOLY COW!
The question is more will SS be there for the gen xers who are paying for the baby boomers’ retirements?