Social Security

They tell us that social security will run out in 2020 or maybe 2030. I'm planning on needing it after that for a number of years.

Here's the thing with Social Security. It was designed as "Insurance". At the time it started, the average worker lived to be 65. This meant that only half of the original PAYERS were expected to collect. And it was meant to SUPPLEMENT other sources of income/equity that the workers managed to accumulate. Instead, many people promptly started depending on social security as their only income in retirement. Also, people started living longer, and wanting to be independent longer. From the first, many people collected more from social security (often much more) than they had contributed (including interest attributable to their contributions). This was no problem as long as more and more workers were available to contribute to the social security fund. When there are three or five or more workers for every retiree, it is not difficult to fund payments for all retirees.

The situation has and is expected to change dramatically. Baby boomers will retire in great numbers and live longer than their parents and grandparents dreamed of. This will create a situation where only one worker (or fewer) may be available to support each retiree. Yet retirees, even if they have ample other sources of income and equity, are and will be demanding that their benefits are paid as promised. Plans to base social security payments on income, or to tax the benefits, are resisted with great angst. "Don't touch our social security."

Too many payees, getting more benefits than the social security fund can provide in perpetuity, means that at some point THE MONEY WILL RUN OUT. OOPS.

You purchase fire insurance for your home, but if your house never burns down, you don't demand your money back. You get automobile insurance, but you know that if you are never in an auto accident, you will not collect. You are generally glad of this. If your automobile is wrecked, or your house burns down, you will receive in benefits far more than you have contributed, but you would still prefer that your house NOT burn down, your automobile NOT be in an accident. The benefit you might receive comes from the premium payments from those who DO NOT receive benefits. This is how insurance works, a lot of people put some money into a pot, and (unlike gambling) the loser, the one whose house burns down or whose car is wrecked, gets the money. (It is a lot like gambling.)

Remember that social security was designed to be insurance. Lots of people would put money into a pot, and the losers (those whose businesses failed, or who became too sick to work, etc.) would have a little bit to fall back on, and not end up destitute. (There are no poor houses anymore.)

But now people are demanding "MY SHARE" even if they don't need it. They expect to have income from social security to fund not just the bare necessities, but the little luxuries of life also, without having to continue to work after retirement.

Some people point out that if they had invested their social security payments in some certain stocks, they would have enough for a luxurious retirement. However, NOT every investment will return enough to live on, much less enough to live in luxury. PLUS, this is NOT the point of social security.

We MUST decide as a country whether we want a social security INSURANCE program, which will provide a fall back position for those who inadvertently end up broke or unable to work, or whether we want a social security RETIREMENT program, which will return benefits based on what we put into the system, and what choices we make in our investments, and of course, the big unknown, what the economy does in the future. If we want the latter, then we need to change dramatically how we collect and invest social security. If the former, then we need to change (probably also dramatically) how we pay out benefits.

For myself, I would MUCH MUCH rather have a ten percent (Or even, gasp, 20%) decrease in my present benefits, to assure that I will continue receiving a least something throughout my lifetime. If I don't get enough now, I can go back to work. But I don't want to come to depend on social security, only to have it go belly up just as I am getting too old to work.

And NO, I'm not giving it up right now. I worked for it, I'm entitled to it. I just want the country to decide how to manage this elephant we have created so that we can continue to pay out benefits based on rational current actuarial and statistical information, and not depend on future workers to fund this program for current retirees.