SAVING  SOCIAL  SECURITY

I want to give you an idea of what we're up against with Social Security.  There are currently more than 58-million Americans receiving social security.  Starting next year, the first of more than 77-million Baby Boomers start entering the system.   Look at those two numbers.  It will easily double the number of recipients.  Recently, we finally reached the point where more money is going out than is coming in.  Can you imagine the size of the problem in the years ahead?

Did you know that nearly 40% of those already on social security rely on those funds for 90%-100% of their monthly include?  Can you imagine what would happen to the social fabric of this country if those checks were to stop arriving in the mail?  Think about it.

Of course, no politician in his right mind would allow such a thing to happen, right?  I mean, so long as it remained under their control ... and not in the hands of fate that would come about as a result of this nation's economic and financial collapse!   And there's no chance of that happening, right?    RIGHT??

It's not like this problem suddenly jumped out of the bushes and surprised Congress.

They've known this day was coming for decades now, after all it was well known that the Boomer Generation was the largest population segment ever to roll across this nation's landscape, like a giant tsunami, waiting to crash upon the shoreline of retirement.  Not only did the democratic Congress know this tidal wave was coming, but they also knew they compounded the problem when in the early 70's they finally pushed through legislation that would allow them to rob the social security trust fund piggy jar, to use the vast sums of accumulating money for more of their pet projects to keep people happy and get them reelected, while stuffing IOUs into the jar.

And every so many years, someone in Congress would bring up the fact that something needed to be done, but like the grasshopper and the ant, the grasshoppers didn't want to hear about it.  They were having too much fun spending the hard-earned taxpayers' dollars  ...and the can got kicked down the road, again and again....and again. The problem now is...that the cupboard remains bare, but now the country is also broke!   We've reached the end of the road.

A few years into the Bush administration, he called for Congress to get off the dime and fix the problem, counting on that rarified time that Congress was run by Republicans, that maybe it could get done.   Only he was immediately skewered for his idea on both sides of the aisle, because the idea of touching the so-called third rail, meant certain death at election time.  Even AARP gave its thumbs down to the idea, and like all special interests, blew the facts out of the water, and presented instead the fear that Bush wanted to take away social security, and the thought of old people dying along the gutters of America, stopped any meaningful changes to save the program.

So, here it is 2010, and the social security sieve is starting to show itself.   I go back to what I said at the beginning that 40% of those on social security (23-million Americans) are living hand to mouth...so what do you suppose would happen to them, should the checks stop coming?  Even those who count on that check the most, would use their common sense

and say, I would be willing to take a little less of an amount, if it would mean that the checks would keep coming.   And of course you know they would say that.   It's plain common sense.   It's a whole lot easier to find ways of cutting a little bit back than it is to be left with absolutely nothing coming in.

Yet in my plan, these same folks would actually be getting more money in their benefits and not less.  Yes, you heard that right, they would be getting an increase in their benefits.  I bet that whet your appetite to hear more.

Actually, I cannot tell a lie.  I get my plan by adopting the plan brought forth by someone who really knows his stuff.  David M. Walker served as the seventh Comptroller General of the United States and was the CEO of the U-S Government Accountability Office from 1998 to 2008.  Currently, he is the president and CEO of the Peter G. Peterson Foundation.  So to say that he's been around numbers all his life and more specifically the numbers surrounding social security and medicare is really an understatement.  I liked his ideas enough that I wanted to present them here, although I might tweak them a bit and add an extra point to his seven point plan to insure us for the future.   All right, let's save Social Security!

First, a little history.  Everyone knows social security came about during the Great Depression and was the brainchild of FDR, or at least he took credit for it.  And everyone thought it was such a great idea at the time, that it never entered anyone's picture that he had devised a giant illegal Ponzi scheme, where the benefits paid out to people was the money paid in by other potential beneficiaries.  But that's really neither here nor there, right now, as I want to point out the biggest PT Barnum moment of all.  FDR said all of this money you pay in, will start coming back to you when you reach 65 years of age.  Just get to that age, and we'll have your back the rest of the way.

Only one slight problem.   The mortality rate or life expectancy for men back in the 30's was the age of 58, and for women it was 61-62.   Do you see the joke, yet?   Old FDR must have been chomping on that cigarette holder of his, saying to anyone who would listen, "They bought it!!"    So while the majority of Americans died long before reaching 65, some did make it, and those folks did receive their benefits.   So, let's see now, if FDR were alive today and proposing that same program, with mortality rates for American men now at 76, he would be putting the golden retirement age at 83, or bumping it up to an easier number to remember - 85 years old!  And the progressives of today might do that, knowing that they would still get that effect of having most die off before claiming their first check.   I am just trying to put a little prospective into this discussion and planting that seed for comparison later.

Another thing, I just feel I have to say.  You've heard me talk about our country having a National crisis of character, culture and morals.  Well one of the things that has been associated with Americans since the 60s has been this need for instant gratification of having the best, the biggest, the most expensive ...and worrying about paying for it later.  Will that be cash or charge?  CHARGE IT !!  Clerks no longer ask that out of date question as you're already asking them if they accept Visa or MasterCard or the Express Card.  As a result bank accounts are usually so low they're sucking up canal water.  But there really was a time, when people took responsibility for their lives, and one of those things involved taking ten percent of their paycheck, right off the top and putting it into a savings account, an account that was never touched because it was for retirement.  The rest went into the checking account and had to last the month, paying out on the bills with hopefully enough money left over to go into a jar in the closet for that vacation, special anniversary or Christmas.  We need to get off our own credit card merry-go-round and pay off our personal credit card debts, car loans and mortgages.  Take advantage of pre-tax 401K programs and post-tax Roth IRAs.   It's been said and proven that if you set aside 2000 dollars a year(IRA) when you first start working full time, say at 18yrs or 20yrs and contributed to it religiously for 20 years, you could stop contributing and leave the magic of compounding interest send that balance up to over a million dollars by the time you retire,  And to show the magic of compounding interest on balances, if you didn't start doing that at age 18 or 20 but waited until you were 30 yrs old, you would have to put in 2000 dollars a year for not just 20 years but for the rest of your working life and it still might not match up with that earlier example.  Just a little tip for young people about to start out on their own.  Okay, enough of that.

Walker's modifications are really fairly simple, based on common sense and are surprisingly painless for the most part.  Here they are, and they come out of his book, "Comeback America", if you want to hear his complete ideas.

1) Focus on people who are most in need.  Provide a higher entry level for workers who have worked at least 30 years to ensure they will not live the rest of their lives in poverty.  Any hard working, productive American should not have to face that prospect.   This will strengthen the social security net.

2) To counter this additional cost, reduce the social security benefit by a modest amount for the higher income individuals, who because of their higher salaries throughout their working life, will have more avenues of retirement income, such as 401K's, IRA's, retirement savings and pensions.

3) Trim cost of living adjustments, again targeting the upper income beneficiaries with a modest reduction to their post retirement increases. (McLellan is suggesting along the lines of a one half percent reduction to whatever the annual cost of living increase amounts to, for individuals who made more than $150K a year at the time of their retirement; a full percentage point reduction for those making more than $250K and a one and one half percent reduction for those making over $350K a year at their retirement.  For example, if the COLA for the upcoming year was a three percent increase, then everyone under $150K would receive it; those over $150K would receive 2 1/2 percent; persons over $250K would get a 2 percent increase and those over the $350K amount would receive a 1 1/2 percent hike in monthly benefits).

4) Raise the normal and early retirement ages, currently at 67 (those born in 1960 or after) and 62 years respectively up to 70 years with early retirement at 65.  (McLellan is suggesting that this change should be 70 years and 67 years, over time...born 1970 or after 68 and 65...born 1980 or after 70 and 67.    Persons 52 and above will not be affected by these retirement age changes and still able to enter full retirement at age 65)  And even though this is only a modest change it will have a significant impact both on social security costs and its unfunded obligations issue.  Walker also proposes that those people who are manual laborers and can no longer do the heavy work, should be able to have access to the disability program.

5) Allow workers to defer their social security benefits if they choose to work beyond

retirement age, in return for a larger monthly benefit when they do retire.  This would

encourage workers who still lead a healthy, active lifestyle, to work longer.

6) Increase tax revenues into the social security system painlessly and fairly by keeping

the current level of 6.2 percent (no increase) but raising the cap on taxable wages from

the 2009 level of $106,800 per person to around $150,000  (McLellan is suggesting that

the tax be lowered to 6 percent and there be no cap on the amount of earnings taxed.)

7) Require supplemental retirement savings accounts.  An additional 2 or 3 percent payroll deduction would go into an individual retirement account for each worker.  Individuals would have several professionally managed investment options to choose from along the lines of the Federal Thrift Savings Plan which Congress now uses along with federal employees.  The benefits of this are that it provides a meaningful pre-retirement death benefit and supplemental post-retirement monthly benefit. In addition, and this is important, this is YOUR MONEY, meaning you have control over setting that retirement monthly amount PLUS you can arrange for it to be handed down to your heirs.   Why more people don't see the beauty in that and would rather have all of their social security withholding be included in this retirement savings account is beyond me. 

That's it!  That's all that needs to be done.  These minor modifications will make our social security system SOLVENT, SUSTAINABLE, SECURE, plus it would be a more savings-oriented social security program, securing a larger monthly benefit for every generation of Americans, but most importantly, IT SAVES THE SOCIAL SECURITY SYSTEM!

8)  I suggest one final item be a part of this plan, as a further guarantee, icing on the cake, so to speak ... and that is to open the gates wider in the annual number of LEGAL, HIGHLY SKILLED IMMIGRANTS WHO HAVE PLAYED BY ALL THE RULES AND HAVE BEEN PATIENTLY STANDING IN LINE AT OUR GATES, IN SOME CASES LONGER THAN A DECADE, to help fill our work needs in critical areas, and at the same time they would be expanding the nation's work base, being depleted by the retiring boomer generation.  Not to mention giving us a larger tax base for our social security and medicare funding, but also more tax money into the nation's general operating fund.

Now, I ask you.  What was so hard about that?

One footnote to all this. If we really want to get our fiscal house in order and shrink

the cost of our federal government to the goals stated elsewhere on this website, the

answer to it and the answer to how we get ourselves out from under this entitlement

program all together is hinted at above.  And that is to allow for not a six percent deduction

in our current social security system but upwards to ten percent of our wages to be withheld PRE-TAX and put into a Federal Thrift Retirement Savings Plan (very similar to what

Congress and federal workers now enjoy) where individuals would have several professionally managed investment options to choose from.  And while the funds are untouchable until

retirement, you would have control over how much your eventual monthly benefit would be

and the entire amount accumulated could be handed off to your heirs, unlike the current

social security system.  I would be happy to propose this for all those people who are currently in school and who have yet to join the work force (those persons 20 or younger) and

also to make this plan an option for all those people 30 and younger, if they are

willing to forgo any social security benefits they have contributed thus far, for the choice

of switching to this plan and not having to put up with the government's retirement age

of 70.  If they find they have enough money to retire, they can do so as early as 62.

Let me know what you think..

                                                        

                            

                                       

                                        

                                       

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