Saving Social Security

The Social Security System could be saved overnight if Congress, the President and the American public wanted. The Washington Post reported that by 2037 all reserves would be drained and  the system would be able pay only 75% of required benefits. There is no secret the fixes could be made quickly and place the system  firmly into the black. There is nothing stopping it except for the political bickering and juvenile emotion associated what is perceived as a guaranteed entitlement.

Without question Social Security through its income programs for those widows, widowers, orphans, retirees, sick and disabled has made life acceptable if not comfortable for millions. We all know that it was never created to be what it is today. In the beginning it was to provide needed income for those reaching age 65 at a time when the average person barely lived to 63. Today the average life span has exceeded that by over a decade and it is estimated that in any one family benefits may be paid out for as long as 26 years. Not only are millions more on the receiving end than the creators of the program ever imagined but the benefits are far greater than what was originally designed.

The real problem, according to Eugene Steuerle of the San Francisco Chronicle, is that Social Security has morphed into a middle-aged retirement system.

In October, 2010 Social Security first went into the red paying out more in benefits than it collected. This was a shock as it was anticipated the program would continue until 2018 before reaching this milestone. In 2011 there will be more red ink and it’ll only get worse unless someone steps up and does something.

Both President’s Bush and Clinton, at different times, suggested moving some social security assets to personal accounts or to be invested in the stock markets. I was against that then and even more so today. Thankfully no plan was ever implemented or we’d be really looking at an Alice in Wonderland scenario.

The tragic minefield that politicians have to tread is the outcry from Social Security recipients and those contributing to the plan. It is truly looked by many as  something that is engraved in stone and that each of us is entitled to. If the mini-public employee revolt in Wisconsin in February 2011 is any indicator of public outcry to change and reduction of benefits the wrath of many Americans will be directed to those that attempt to make changes or save Social Security.

The attitude has always been that people have been paying into Social Security and that they better get everything they paid into it out or else.

Here are a few ideas, certainly none of them new or mine. The problem with entitlements is just that – folks get to thinking that they deserve the benefits no matter what their economic situation.

1. Index retirement benefits based upon net worth, pension income or assets.
2. Raise normal retirement age benefit to start at 70.
3. Reduce COLA formula or freeze them.
4. Increase percentage contributions by workers
5. Raise ceiling on contributions to $150,000 or on all earned income

All the above will work and save the system if we really want to have it continue. The problem is that greed and the entitlement attitude gets into the way of common sense. The most important thing to remember is that Social Security benefits the young and infirm along with the aged. Lets make sure the benefits continue to those that truly need it. For more info on Social Security please go to www.SSA.gov.

Questions call Paul @ 877 783 7080 or write him at pstanley@westminsterfinancial.com. Share this blog with someone who cares about their money.