Reading the letters to the editor this morning. The one letter is railing at a letter from earlier in the week calling social security a ponzi scheme. He argues that he has paid in and is entitled to his benefits. He also argues that S.S. has worked well and is solvent besides being basically the only pension plan out there any more. He does acknowledge the need for adjustments to benefits and taxes as we go forward.
The letter writer is right on at least one statement SS is not a ponzi scheme. Social security is a pyramid scheme and we're working towards inversion. When ss started there were multiple workers for each retired person. This is important to remember because we are not paying our own way. Our social security tax (fica) is not meant to provide us with any benefit it is there to provide benefit for those already retired. In the 1940's there were 42 workers for every retiree we are nor at 3 workers for every retiree. This is a a pyramid that could easily flip if unemployment stays at it's current high level.
This is one point that Bush was definitely right we need to find a way to allow people to invest their money for their own retirement. Even if it radically changes benefits and promises made to current recipient of SS. I believe this has to be the starting point to any deficit reduction plan. Without adjustments that will no doubt be painful Social Security will bankrupt our country.
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You are right about Social Security. I foresee several adjustments. The age for drawing benefits has already been adjusted. The change that will make my head explode is the likely idea of "means testing." Basically, means testing means those who lived responsibly and fully funded their ROTH IRA will be told thanks for contributing to SSA, but we don't think you need to be paid back and those who lived in the moment and spent every cent they earned will get SS payments.
ReplyDeleteAs long as politicians are too gutless to take real action the situation will get worse and the fix will be more painful.
The best plan I ever saw was presented by Harry Browne when he ran for President in 2000. Social Security ends immediately. Those below a certain age -- I think that it was in the 50s -- will not get paid benefits. They'd be better off investing what they make in the future themselves. Those approaching retirement who have paid into Social Security will receive a lump sum payment generated from the liquidation of US federal assets, such as national forests, etc.
ReplyDeleteI think Brownes plan has some merit however I would not be so quick to sell off treasures such as the national forests.
ReplyDeleteThe real problem is giving people enough time to provide for themselves. I would go for a more graduated plan. Raising retirement ages and having benefits of some sort all the way back to thirtyfive or forty. The graduation of benefits would have to be matched by graduating the taxes taken.