Monday, August 31, 2009

Social Security is a Ponzi Scheme that has alomost run its course

The simple fact is that when a ponzi scheme runs out of enough new money it has to stop. We now have two workers to support each person currently drawing from the fund. Those two workers in actuality aren't paying for their own benefits. At what point will the government radically change the system? The reality is that no politician wants to touch the issue. It is considered career suicide.

How did the system get so broken? You will hear people say that it is because the government has been robbing the fund to try to balance the budget. While that is partly true, that isn't why the fund will collapse. Take a person that retires after 45 years of working. If they had a far above average job and made far more than the median income, they would have paid in $119,000. I got at that figure by doubling the median income for 45 years and used the current payroll deduction with employer's matching contribution to get at that figure. Let us assume that this far above average wage earner only draws $1,500 per month from the SSA fund. In just 79 months (6 years, 7 months) they will have taken every cent they paid into it, out. It isn't hard to see why the fund is going broke. People are living decades past retirement and drawing triple or more out than they paid in.

There is another reason for this as well. The fund was established to pay people that had no pension from their job enough to live on. Their are literally millions of people that collect those checks every month that shouldn't be getting a thing. Either because they are wealthy or as an example, a retired teacher that is drawing 70% of their best year's salary as a pension.

I think the quickest and easiest fix is to only allow those that need to draw from the fund to do so. I know what you're thinking. That doesn't sound very Republican to me and what about the fact that everybody that works pays into the fund!!! The problem isn't a partisan issue though. The good lord willing, we will all reach retirement age regardless of your political views and if you have not financially prepared yourself, you will need the fund. The fund only has about 30 years more before it is totally insolvent and something needs to be done now. My suggestion to any politico that has some balls is to draw a line. If you have a net worth of one million dollars, you do not get a check. If you have a pension that pays you $2,500 per month or more, you do not get a check. If your pension is less than that, your check should only make up the difference between the two. If you have no pension at all from work, the max you should get is $2,500. I only included this because the silly statement I get from the SSA says that I will get a lot more than $2,500. Of course that's a joke because I sincerely doubt that in 22 years when I am eligible to collect those checks that there will be anything left to collect.

Will that be enough to save the fund?? Heck no, but it will buy the government another decade or two to come up with a real solution.

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