Sunday, January 16, 2005

Social Security

OK first of all it's not a retirement program, it's an insurance program. It's full name is Social Security Insurance (SSI). It's not meant to be the source of your retirement income. It was designed to provide for those people who lived longer than their money held out in retirement. When it was instituted, you were still expected to provide for your own retirement. Now most people expect SSI to pay for their retirement.

When it was begun less than 10% of the population lived long enough to collect SSI. The retirement age would have to be raised into the mid 80's at least for it to reflect the same expectations as when it was instituted. And the people who did collect SSI usually collected it for a very short time. Today people collect SSI for 20, 30 and even 40 years. And as medical science advances, life expectancies keep increasing. When SSI was instituted, SSI taxes were very low. By the time I retire (I turn 40 this year) only two or three people will be paying into the program for every person collecting. How high are their taxes going to have to be to support the program?

SSI is a pass through program. There is no money there, just a lot of useless IOUs. All of the money put into the system is immediately paid out in benefits. Any money left over is raided by Congress. SSI has no assists beyond its power to tax the American worker.

If you are reading this and you are under 60, I hope to hell you are planning for your own retirement. If you are in your 20's, start NOW. Start putting 10% of your income into a money market or at least an annuity. It'll be tough, but if you do you will be able to retire in comfort. If you don't, start developing a taste for cat food.

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