Tuesday, October 11, 2011

Reply to Social Security Doubter

Comment: I've been paying into the Social Security System for over 20 years...I don't expect to see a dime of it when I retire. Leave it to the government to be fiscally irresponsi­ble. No one can even explain how the system is even sustainabl­e with the amount of retirees vs. people still working.

Reply to Comment: The system is sustainable because there's such a big surplus in the Social Security Trust Fund; it was anticipated years ago that there would be an increase in benefits paid out when Baby Boomers retired. Social Security running a deficit does not mean the program is insolvent. It means that it is drawing down from its 2.6 trillion trust fund (a fund which finances part of the national debt through the purchase of special Treasury Bonds).

Social Security can pay out every dime owed for the next 26 years with no changes to payroll taxes, retirement ages or benefits; after that, it can still pay out four-fifths of obligations. The only thing needed to "fix" Social Security is an increase in the salary cap at which payroll taxes cease to be collected. That cap is fixed at $106,800. (That means that people who make a million dollars pay an effective payroll tax almost 10 times less than people making $100,000.) Raising that cap to adjust for inflation would finance Social Security 100% through at least 2084.

So if you want and can afford to invest in a 401(K) or a Roth IRA or some other company pension plan, go right ahead. Social Security will still be there for you, even when the stock market tanks, you or your company goes bankrupt, or your financial adviser runs off with your retirement funds. Just don't screw with the most successful program ever that keeps millions out of poverty (look up poorhouses).

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