Will You Be Able to Retire?

Will You Be Able to Retire?

I have returned from Mexico and have spent most of today re-acclimating. It's tough to go from starring in your own private Corona Beer commercial, to sitting behind a desk trying to use the old brain, but here goes…

I have noticed that there is a lot of talk in the news about the president's grand plan for social security reform, so with that in mind, I thought I would look at the simple, but for most of us, important question…Will you or I be able to retire?

If you are like most Americans, you are looking forward to the day when you can quit work and start living, and like most Americans, you are counting on good ole Uncle Sam to make sure your retirement years will be good ones. If this describes you, I want you to take a deep breath and listen to what I have to say. If you think that Social Security will care for you in your senior years, you have been deceived. By the time most of us Americans, who are still currently working, retire, there will be no money in the Social Security Trust Fund. In fact, there is no money in it now. I know that comes a shock to most of you, but in fact it is true. You see, the government sells special bonds to the Social Security Trust Fund. These bonds are nonnegotiable, which means they cannot be sold on the open market, and they pay about 2% interest. The government then takes the proceeds from those sales and spends it. The money is gone, forever. In it's place, a pile of IOU's.

The simple truth is, the social security trust fund is not a fund and it is not a trust. In fact, it is more like a Ponzi or pyramid scheme. Normal folks like you and I would be jailed for setting up a retirement plan that operated like the current social security system.

If you go the Social Security Administration web site, you will read that they predict that retiree benefits will exceed worker contributions in 2018. Click Here.

That means that the SSA will have to start cashing in these government IOUs to make ends meet. Now think about this…our government which has been running a budget deficit for several years, is now going to lose access to social security's excess funds in 2018 and they will have to start retiring these special bonds so that all of us retired folks can collect our measly monthly checks. Where are they going to get all that money?

Faced with this unpleasant scenario, the feds only have a couple of options. They can increase the retirement age, which only delays the problem, or they can increase taxes, or they can do both. None of these options are financially feasible in that they only delay the inevitable insolvency of the social security fund. That is why the president is pushing his reform plan. Now, as a person of libertarian political persuasion, I have to tell you that if the government is going to tell me how I can invest my own money, then my retirement funds won't do much better than the current system. Who stands to really benefit from this plan? Wall Street. This scheme will keep the market from heading south at least for a while longer.

So, with all of this pleasant news today, what's a guy or gal to do? Well, I'll tell you next time.

See you soon…