Social "Security?"

Here's an eye opener brought to you by FDR... the enactment of the Social Security entitlement, one of his "New Deals". When entering the work force the government insists you to pay 7.5% of your gross income, (15% if your self employed), toward your retirement fund. According to the Social Security calculator if you earned the average median income ($47,000/yr) till age 67 your benefit check from The Social Security Administration, would be a whopping $1581.00/ month, assuming you began working this year,(2010). Note; This figure doesn't account for inflation nor raises in income. So after paying out $7050.00/ year for 45 years ($317,250 total) the government would pay you back $18,972.00/ year, till you die. Sounds like a great deal huh? The average life span for an American male is 73, while American women are expected to survive to 79. So if your a male they would pay out an average of $132,804 and a woman would receive $227,664.00. Kind of makes you take pause here and wonder why this fund is going bankrupt.

Now had you invested that money (15% of $47,000/year or $7050.00) and collected say 6%. Your gross retirement fund would be......$1,638,127.93 by the retirement age of 67. I don't know about you but this is a considerable increase in your standard of retirement living and a classic example of how the private sector does a much better job than the government. Let's say you survived to age 100, you could use a benefit of $49,640/year, assuming the money never earned another dime of interest. So who's plan do you like better? The evil capitalist free market solution to retirement, or the socialist program forced upon us by FDR and his progressive agenda?

This private investment is exactly what former President Bush proposed to aid the social security into solvency. It was met with harsh criticism. Citizens were afraid to gamble their retirement investment in the ever volatile stock market, again led by misinformation. There are many secure investments that would return that 6%, like tax free government bonds, treasury bills.

So why is the Social Security system so broke? From the above formula it seems like it could sustain itself indefinitely. Well the major problem is the federal government "borrowed"/stole the excess. They chose this route so as not to raise your taxes to cover their shortfall. They figured their would always be people paying in enough to cover the pay outs needed. Wrong! People are living longer and the baby boomers who initially created the surplus are about to retire. So less money coming in can't keep up with the demands going out. So another well intentioned government entitlement ends up a financial mess.

Now the lesson here is....The government believes it's citizen's are incapable of being disciplined enough to provide for themselves, so they have to step in and be the nanny. People mistakenly accept the meager return on a secure government program because it offers them security. ANYTIME YOU OPT FOR SECURITY FROM THE GOVERNMENT YOU SACRIFICE A PIECE OF YOUR FREEDOM. How many more options do you have with a retirement fund that pays you a million six over a government run one that pays you one hundred thirty two thousand. It sounds to me like you'd have more options (freedom) with the first plan. Another good question to ask yourself is; Just how secure is a government program that's running this far in the red? We are told everyday it's not sustainable and on the verge of collapse. Remember the saying is; "In God we trust", not the government.

God Bless
Capt. Bill


Sources; Social Security benefit calculator web site, Wikipedia, and the savings calculator web site.