By now we have all heard the horror stories about Social Security and how long it will last. As a baby boomer who is married to a baby boomer and facing retirement in the near future, I feel this issue has to be addressed as factually as possible.
First a wee bit of history. Social Security came into being on August 14, 1935 under the mantle of the Social Security Act. This act not only promulgated Social Security, but also allocated money to the states to provide assistance to aged individuals (Title I), for unemployment insurance (Title III), Aid to Families with Dependent Children (Title IV), Maternal and Child Welfare (Title V), public health services (Title VI), and the blind (Title X). The act has been embroiled in controversy and constitutional arguments since it's inception. Although it has been modified many times since the 1930's, two of the bigger changes are as follows. In 1965, Medicare was added under the Social Security Act of 1965, part of the Great Society program. In October 1972, Congress amended the Social Security Act to incorporate Supplemental Security Income (SSI).
So with all of this Congressional oversight and tinkering, why is Social Security going broke? The answer can first be used by giving an example. The first monthly payment was issued on January 31, 1940 to a woman in Vermont. From 1937 to 1939 she paid a total of $24.75 into the Social Security System. Her first check was for $22.54. After her second check, she already received more than she contributed over the three-year period. She lived to be 100 and collected almost $23,000. My parents are another good example. My Dad worked until 70 and then started collecting Social Security - he lived to be 90. He died 5 1/2 years ago and my Mother has been receiving a pro rata share of his benefit. My Mother, now 91, has received many times the amount that she and my Father contributed into the Social Security Trust Fund.
To use a term that is being bantered around with abandon these days, the Social Security system is unsustainable. It is unsustainable because the premise on which it was based is no longer valid. First, the system assumed that more people would be paying into the system than receiving benefits. That might have been the case at one point in our history, but it surely is not the case now. Next, we have many people who are receiving benefits that have not contributed one dime into the system. Finally, we are living much longer these days than our grandparents did. In short, it would have been a miracle for Social Security to work as well in 2010 as it did in 1950.
To add insult to injury, most know the system needs major repair and needs it now. However, this issue in not called "the third rail" for nothing. People (like me) who have involuntarily contributed into this fund my entire working life will not take lightly any diminution of benefits which were promised to me years ago by the Federal Government. I pride myself on being a law abiding citizen, however if the hundreds of thousands of dollars that my wife and I have taken our of our paychecks, put into the fun suddenly evaporated, it would be time to get the torches and pitchforks.
The solution? If I knew, I would be in Washington D.C. making a fortune as a consultant. One thing the Federal Government could do is offer an opt out clause to people like me. In other words, give me back every dime of social security money that has been taken from myself and my employers and distribute as a lump sum. No interest would be required and all rights waived for receiving any other Social Security retirement funds from the United States Government. I would take that in a heartbeat. I would manage the account, live on it, and have money left over to pass on to my kids.
The bottom line is, as the old saying goes, "bad news does not get better with age". We need to fix this and fix it now without shooting the wounded and imprisoning the innocent.
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