Social security is exempt from sequestration so even the budget cuts I talk about go into effect it will not affect this quickly bankrupting entitlement program. This is a shame since Social Security and Medicare are combining to bankrupt the country. The question then is how do we reform Social Security so it is around for those who depend on it without breaking the bank or eliminating the benefits of the program.
Some things to consider before we get into the details:
When Social Security was passed it was
A) Voluntary
B) Eligibility was right around average life expectancy
C) Originally you paid 3% of your paycheck up to a maximum of $3,000k a year.
Generally it was never intended to be the de facto retirement plan it was intended to help put a dent in senior citizen poverty for those who had managed to live so much longer than average that they really couldn't work. Things have changed dramatically since then.
Average life expectancy is above 77 but people some people are retiring early at 62. The social security "trust fund" is now used to cover shortfalls in the general fund. Even at the new funding rate of 6.2% instead of 3% someone who retires at 65 and collects social security until they die at the age of 80 has actually used up whatever money they "paid" into the system before they turn 70. This means that for those remaining 10 years they are not "getting back what they paid in" they are just stealing from their grandchildren. Meanwhile, the disability portion of Social Security (The D in SSDI) has grown so large, unmanaged and full of fraud that it has become a de facto welfare scheme.
Finally I would point out that in the market, Ponzi schemes where current investors are used to pay returns to past investors are illegal yet that is exactly what Social Security is. Not to mention all the people who receive Social Security checks without actually having paid into the system at all.
Given all of this I propose the following solutions. Since it is my money why am I not able to opt out of the program? Or why can I not eschew the SS fund and their measly 2% return (if I am lucky) and have a private investment account I manage on my own? I understand that people over 50 are probably too far gone to change their retirement planning but why not give those of use under 40 the option? At the current rate it will go bust and take the rest of the country with it in 50 to 75 years. That is within the lifespan of us and our children. Why not let me opt out and give me a private account? Doing that and raising the retirement age will solve the problem in perpetuity.
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