I am a big proponent of the American people, their wisdom and overall good judgement. They were smart enough to elect a great American like them instead of a politician, someone who loves his country and was sick of the downward direction it was headed and decided he had to do something about it.
However, Americans are like sheep and lemmings in some ways, especially when it comes to taxes and social security, they take a beating without knowing why. Both are theft. You heard it here first – THEFT! Theft of your earned income, your sweat equity, your greenbacks. We have income taxes, social security, and other deductions from our paychecks and when we are old enough, collect social security without a thought.
Let’s examine Social Security (hereafter denoted “SS”), which is neither social or secure (I will comment on income taxes in a later column). It is a Ponzi scheme of the largest order, where those at the end of their working lives collect a pittance of what could have been earned being invested in a good mutual fund. And those beginning to pay in will do so for more years to gain the benefits of the system.
As an example, let’s look at “Mary Doe.” She is 22 and just started her first real job. When she receives her first check, she is shocked — SHOCKED to find all the deductions for income tax, social security, and others. As an average, 30% to 40% of her check is spent on taxes and other deductions for state/city income tax, insurance, union dues, etc. Let’s say after a year, Mary finds her social security taxes were $5,000 total for the year.
If you took $5,000 and invested in a mutual fund every year at the same amount and it averaged 8% over 44 years (Mary would be 66 years old then) – she would have a total of $1,840,000 (total + $5,000 yearly investment x 1.08%).
Now detractors will say the public system of SS is better than investments. Really? What is the guarantee you’ll live to 62 to 70 years old to begin receiving benefits? And what will the retirement age be for Mary Doe? What amount of benefits will she receive? Folks, the system is going to change – either the benefit will be reduced or the age of early (now age 62) or full retirement age will increase, making Mary Doe and her generation work longer to receive one penny in benefits.
It’s called the law of diminishing returns. Less workers supporting more retirees, which drains the amount of revenue allotted to the SS system.
Her $5,000 yearly amount will increase, never decrease, so that $5,000 will go up. And some years the return on her investment in mutual funds will be lower or higher than 8%. But with an average of 8%, she will be much better off than what she would have received in SS, and it would be hers to do so as she wished.
Let’s use an example of Mary Doe working to her full retirement age (66 in today’s full retirement age) and she received $2,000 per month in SS benefits, and she lives to 87 years of age. That would be a total of $420,000 ($2000 x 12 months x 21 years) SS dollars for Mary Doe. So would Mary rather have $1,840,000 in her nest egg at the end of 44 years of her labor, or $2,000 a month ($420,000 total) in SS for her lifetime?
But what if she dies before she starts collecting SS? Tough luck! Her survivors will receive nothing unless they are handicapped children of the deceased or she had a higher SS benefit than her significant other (if she were married). If she had a mutual fund, the amount in the fund would be what the survivors would receive.
There will never be a guarantee in life for what you’ll receive in retirement. But if you depend on the government to provide in your “golden years,” you will be sorely disappointed unless you have supplemental income.
Established in 1935 by President Franklin D. Roosevelt, it was a copied idea from a system established in Italy by Benito Mussolini. At the time, the average American lived 61 years, but SS didn’t kick in until age 65. What a nice scheme! The government makes money and on average, doesn’t have to pay anything out. You sure the Mafia isn’t involved in this?
Of course, life expectancy increased past 65, the “trust fund” was raided by Congress and spent, and the system is paying more out than what was coming in – classic Ponzi scheme.
It wasn’t an old age insurance policy, as decreed by Roosevelt, it has become forced savings, but Congress keeps spending and the “trust fund” has also been depleted by inflation. It takes more of the budget to make sure SS remains solvent.
Just think of it this way – you deposit your money in the bank and the money goes out the back door to be spent by others. Hopefully there will be enough pennies left for you.
Do you see the picture, do you get my drift, or am I being obtuse? SS will be seeing big changes sooner than later, so be prepared to lose some of your “trust fund” in your golden years, either by working longer or a reduced amount in benefits. Either way, the taxpayers are getting royally screwed.
The rotting of America from within continues…
