Finally, I have one last word related to the matter of age and Social Security. Social Security was never intended to provide for retirement. It was intended to supplement your other preparation for retirement or to provide a bare bones subsistence to those who were unable to prepare. When it first started, the average recipient lived 6 months after starting to receive benefits. Now recipients live a lot longer. The money was never invested in an aggressive way, which would be appropriate for a long term investment. It was never really even invested in a conservative way.
We borrowed money from the social security trust fund for general operating expenses. If the social security trust fund were in a large chest and you opened it, you would find “IOU’s” signed by successive Congresses down through the years. These “IOU’s” are supposed to be legal instruments. On paper, there is a lot of money in these instruments. In reality, there is nothing backing these up. In effect, the surplus that existed was used for general operating revenue and the current workers directly supported the current retirees. If the money had been invested, there would be a large surplus stacked up by now.
With the demographics at work, the aging population being a much larger percentage of the population than ever before, the social security system will be stressed in the future as never before. One projection I heard, for example, is that a point will be reached in this century when one half of the population will be over 60 and one person in ten will be at least one hundred! Whether or not that is accurate, I do not know, but just think of the “Hell No! We Won’t Go!” folks from among us Baby Boomers getting old and not intending in the least to do it gracefully.
Imagine these folks, with real political clout, saying, “You ain’t gonna warehouse me in an old folks home and expect me to just lie there waiting for death! Hell No! We won’t go! If anybody is gonna be warehoused, it ain’t gonna be me!” Think of the stresses at work in our society as the resources are juggled to find a way to placate a politically powerful majority who may not be amenable to compromise.
Will social security collapse? Any political party that advocated the death of social security would be committing political suicide, especially since elderly folks will have greater political clout than ever before. Human nature being what it is, there will still be large numbers of people who have never prepared for retirement at all. Social Security will probably be changed repeatedly: later ages to qualify for benefits, smaller benefits, and much higher social security taxes. There will be enormous pageants of demagoguery over this issue, but it will probably continue to exist. The wise course of action would be to prepare as if social security will not be there waiting for you. Then if it is, it will be a tiny augmentation to what you have prepared for yourself with all of the other ways you invested. Social security would be a little extra surprise.
I do not believe it will be terminated, but to be safe, do not count on it. If it does collapse, it will not fall on us Baby Boomers. It will tumble down on the schmucks that come behind us, the Generation X-ers, Y-ers, and Whatever-ers, that we are saddling with our debt. We are hacking away at each other, the left and the right, demagogueing, while our children and grandchildren are probably losing their chance for a prosperous future. Well, who cares, as long as we, the wonderful BB’s, are taken care of. Pardon me as I wipe the dripping sarcasm off my chin before I continue.
One argument that I hear is that technology will save us. Productivity will explode so massively, as it has in the past, that everyone will have everything they need, so much so that the failure of the BB’s to live within our means will not have the consequences for those that follow that it would have otherwise. Maybe so, but is it fair to those who come after us to gamble on that possibility? Let me illustrate the problem I see with the following observation. I was watching a town hall-type meeting on TV several years ago, perhaps 15 years ago. On the platform, there were 4 liberal folks: 2 pundits, an academic, and a bureaucrat. There was also one conservative academic. (They located him for the show by referencing the endangered species list.)
The audience of “everyday Americans” began to suggest programs that they felt should be implemented to facilitate all of our lives. It was a shopping list of Nanny State programs that would pile massive debt on the backs of future generations, though no one in the audience seemed to understand that. Even the liberals, all 4 of them, commented on this. “These are all wonderful things, I’m sure, but no one here is asking the question, ‘How will we pay for all of this?” “If we do these things on credit, which is what we usually do, who pays for it, your children, your grandchildren?”
Even after the liberals and the lone conservative raised this issue, this group of about 300 people just kept right on getting on Santa’s lap and telling him what they wanted. It is as if most folks believe there is this inexhaustible, massive pile of cash somewhere, one the “money-grubbing rich folks” just don’t tell us about, that we can tap into forever. When he visited the young United States, Alexis de Tocqueville predicted that the American experiment in democracy would work well until the electorate realized they could put themselves on the dole. Give the guy some kind of award for prescience. No, Virginia, there is no Santa Claus. There is you and me and all of us and we have to pay for our own here and now and let the people of tomorrow have all of their money available to them to pay for their tomorrow, not our today.
We need leadership in this area, a strong communicator who can somehow break through our thick skulls without being shot down with the outrageous slings and arrows of flaming class warfare rhetoric. By the way, it “ain’t” me. I do not have the necessary skills. If it is you, stand up and take on the job. I will supply the tights and the hero suit. Imagine a bullet proof guy, no, a demagogue proof guy, flying around in a costume with “PAYGG” emblazoned on his chest. “Look, in the sky, faster than a speeding spending bill racing through Congress, more powerful than an entitlement mentality, able to leap over tall taxes in a single bound. It’s a bird! It’s a plane! It’s ‘Pay As You Go Guy’ and he is saving our children and our grandchildren!”
Imagine these poor young working slobs paying most of their income (in total taxes: income and social security taxes) just so old retired hippies (we Baby Boomers) can eke out a meager existence. Are we going to have soldiers with M-16’s go into their government owned shacks and roll them out of bed and make them go to work at jobs that will pay them nothing because all of their income will go to taking care of us old goats? We old people will rule the country for the first time in our history because we will be the majority and our generation is not exactly renowned for our selflessness. Is there a possibility of a Civil War, one based on age, like none ever witnessed before, the young folks rising up in rebellion against the oppression of the old?
I’m kind of joking here, but I’m also kind of not joking. Do whatever you can to prepare for retirement. There is more at stake than just you. You need to do this also for the benefit of future generations. The welfare of your children and your grandchildren could be at stake.
I WILL EMPHASIZE HERE AGAIN THAT, if you are new to this, You SHould read “24 Essential Lessons for Investment Success” by William J. O’Neil in order to BEGIN TO understand how to make your investment decisions and to try to get the higher returns.
