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Thursday, January 27, 2005

Social Security and Your Future

(from my latest radio commentary)

Social Security is in crisis – or is it?

Once again, an issue of relevance to the entire country is being debated entirely along party lines. While that doesn’t bode well for the new ‘unity’ in our government, it does demand that we address the issue in a manner that is as logical and objective as possible.

The facts about social security come from those who are responsible for oversight of the Social Security Trust Fund. They state the funds received will no longer meet or exceed the funds distributed as of 2018. That means within 15 years, the Social Security Trust Fund will go into deficit spending.

However, it will not be broke at that point. Because the Social Security Trust Fund currently has a one-point-five trillion dollar cushion in the bank, the government will continue to distribute Social Security benefits at the expected rates until 2042. At that point the money will be gone, and recipients of Social Security benefits will begin to see cuts.

With that known, is this a crisis, or isn’t it? The Republican Party has declared that it is, and plans on executing a personal account plan that allows workers to withhold Social Security deductions and invest them in accounts of their choosing, as opposed to the current government or treasury bonds used by the Social Security Administration. In theory, this should allow workers to manage their own financial futures and make larger profits…because on average, in the long term, returns from the stock market outperform bonds. The plan’s drawback is that Social Security receipts would decline in the short term, which, if the plan fails, would hastens the approaching deficit and bankruptcy. Therefore, Democrats say that Social Security should not be touched, because the problems are far off.

What should those of us who will be affected by this know?

First, there is no bond or fund with anyone’s name on it. By simply changing the tax code, the government can stop paying benefits at any time.

On the other hand, doing so would be political suicide. So, while it may be legal to halt Social Security payments, it is not reasonable to think it would happen.

Also, both sides acknowledge that there is a problem….but they disagree over a response. One side thinks a small action now prevents drastic action later, while the other hopes to wait and see. This is for certain – while ‘do nothing’ is always an option, it is seldom the best option. Some action needs to be taken, whether it is a Social Security tax increase or an eventual reduction in benefits, or personal accounts. It’s a question of the politically possible.

Look, if your retirement plan is to depend upon the government for your income – you have a bad plan. Start planning, preparing and working, now, to provide for yourself when you retire. Relying on someone else to do it for you is a recipe for disaster.


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