The Social Security system is a “Ponzi scheme” system. That is, present workers have money deducted and said funds are sent immediately to the recipients. So, the trick is you need more and more workers into the system to pay the retired ones. There is NO money set aside in a “lockbox” as Al Gore promised many years ago. Congress over the years has taken excess monies in the Trust Fund and used it for other purposes, depositing an IOU into the Trust Fund.

So let me get this straight…you had Social Security tax money deducted from your paycheck to supposedly have it set aside for your retirement, but instead your money was sent to a retired person (Social Security is not set up like a pension or 401(k)). Now, since there is no money in the account for you when you retire, the Government’s system is that any payment you get will be taxed in order to pay back the IOU that Congress took out without asking your permission. If any other person or company did this scam, they would be in prison…Let’s see…Bernie Madoff, the Keating Five, Enron executives – on and on! Now, tell me again why you voted for these legislators?

Congress has known that Social Security is in a mess, but they have not had the guts to tell you. Yet, you are told every year that things are bad when you get your annual Social Security statement.

Here is a paragraph from the front page of my statement dated February 18, 2009:

“…Now, however, the Social Security system is facing serious financial problems, and action is needed soon to make sure the system will be sound when today’s younger workers are ready for retirement.

In 2017 we will begin paying more in benefits then we collect in taxes. Without changes, by 2041 the Social Security Trust Fund will be exhausted* and there will be enough money to pay only about 78 cents for each dollar of scheduled benefits”… (*These estimates are based on the intermediate assumptions from the Social Security Trustees’ Annual Report to Congress.)

Now look one year later at the February 12, 2010, statement:

“…Now, however, the Social Security system is facing serious financial problems, and action is needed soon to make sure the system will be sound when today’s younger workers are ready for retirement.
In 2016 we will begin paying more in benefits then we collect in taxes. Without changes, by 2037 the Social Security Trust Fund will be exhausted* and there will be enough money to pay only about 76 cents for each dollar of scheduled benefits”… (*These estimates are based on the intermediate assumptions from the Social Security Trustees’ Annual Report to Congress.)

In just one year, from 2009 to 2010, notice that the payout in benefits versus tax intake drops by one year; the fund become exhausted four years earlier, and the payout drops from 78 cents to 76 cents.

Social Security has been printing these reports yearly. So, some years in the future when there is no money to pay out to you, or you have reduced benefits…you can’t say…”but no one told me.”

I remember George W. Bush trying to push Congress and Americans to do something about Social Security in 2005, but everyone rejected his ideas to privatize part of the system, and 10-15 other remedies that he proposed.

As for your planning…well, I have all my clients develop their own “social security plan,” with their own money that they control.

Do not count on this system for your retirement.

When FDR started this “pay as you go” system of income transfer and distribution (sounds a little like the old Socialist “manifesto”) it was designed for the truly indigent to provide a base retirement benefit. In 1933 there were 72 contributors paying for each recipient. Eligible participants received benefits starting at age 65, yet, life expectancy was age 62. The system became flush with cash. Wanting to insure votes Congress provided more benefits and expanded benefits. Presently, 1 out of every 4 Americans receive some form of benefits (the retirees are among the smallest percentage getting benefits). Life expectancy has risen to the mid eighties. There are less than 2 contributors for each beneficiary. The baby boomers are now approaching retirement. Does anyone see this massive collision course in front of them besides me? Sure, there are some in Washington that see it. For one, President Bush tried in vain, to present it, but, the media, certain congressmen and other lobbyist did want to lose their power by allowing change. I also throw a lot of blame on the American public as they were so apathic. Americans are not good at planning long term, especially financially.

Instead, the American public will allow for the system to go broke and be faced with MASSIVE changes to the system. A small change now could avert the coming doom.

Unfortunately, the Bush administration is rumored to be ready to cut a deal with the Democrats. (This has been in the works for a long time). Future benefits would be means–tested; the cap on income currently being taxed ($97,000 in 2007) would be lifted or eliminated (just like Medicare); the age in which beneficiaries can draw benefits would be lifted to 70 or 75; and future indexed benefits would change. Instead of allowing private accounts Congress would allow Super IRAs.

These proposed programs are a disastrous plan for you. Instead of worrying about when the system will go broke, Americans should own their Social Security retirement plans, not Washington politicians. Our country is wealthy enough to cover current beneficiaries as well as those entering the system in the next ten years.

The debate: What should be done for young workers. American workers should own their own retirement plans just like most Americans should own their own homes (have you ever seen a government owned and operated housing project? Get my point?). When the government owns anything there is no accountability.

A comprehensive plan set out by the American Institute for Full Employment (www.americaislistening.org) called the 7.65% solution is worth considering. The bold plan calls for the entire portion contributed by you, 7.65%, would go into your private retirement and health account. It has sensible restrictions on how the money can be invested. In addition the remaining monies in the fund would really be placed in a trust fund and could not be spent on congressional pet projects.

The system would give you choice. When you retire you can choose to get benefits from the traditional Social Security System or use your own account. Yes, you could take the greater of the two.

If you are not financially independent, are over 25 years old, and are making your retirement plans contingent on some benefits from social security, then you better contact your representative now. Tell them you want your own private retirement account instead of social security.