Skip to main content

Social Security and Retirement

The current media narrative is that "social security" is not reliable. It has gotten to the point that this urban myth has become an accepted part of unrelated discussions of retirement. Here is one on article on retirement planning that is an example. This repeated media driven mantra has lead many young people to adopt the attitude that, as one told me 15 years ago, "I don't expect to get any social security."

But in fact that is wrong. Even once the social security trust fund is gone in 30 years, continued revenue is expected to cover at least 75% of the projected benefits. And even that is based on projections that assume US workers wages will continue to represent a declining proportion of any increases in productivity. And reducing benefits to 75% of those promised is only one of many options, if in fact social security taxes don't cover all the promised benefits.

The reality is that for many people Social Security is the ONLY reliable leg of the stool. Personal savings are subject to the vagaries of investment decisions and the market. Most people do not have a pension and many don't even get any employer contributions to a 401k.

The real threat to social security benefits is political. There is a determined effort to gut social security and the people who oppose it have been very successful in portraying the system as insolvent.

The problem is not that social security is insolvent or ever going to be. Its that the money borrowed from the social security trust fund will have to be paid back, probably from income taxes or borrowing elsewhere. Just as surpluses have been used to reduce income taxes and the deficit over the past decade

The income tax is one of the few taxes that takes a bigger bite out of the wealthy than it does the middle class. And the wealthy are also the least dependent on Social Security for financial security in their retirement. Most of the nation's decision makers, opinion makers in the mainstream media and economists belong to the class of people that has more to lose from paying back the loans from social security than they have to gain from a secure retirement fund.

So, there is a lot of political pressure to avoid having to repay the loans from the Social Security Trust Fund. For the last 25 years, wage earners have been paying higher taxes on their income than necessary to support the benefits paid to current recipients. The reason for those extra payments was to cover the retirement needs of the baby boomer demographic bubble. In essence, we have been paying both retired workers benefits and fronting some of the cost of our own.

Most of this article above addresses that same audience. For many people their first career was about making money, making money and making money. "Fulfillment" was not part of the formula because, with their talents and training, they didn't have the option of a job that was both fulfilling and provided a living. They got their fulfillment from things they did that did not require an economic payback.

For those folks, a majority of Americans I think, retirement has always been about ending un-fulfilling work and having more time for the fulfilling parts of their life. And that really is about having enough money so that earning income is no longer the deciding factor in how time is spent.

Making a location decision based on finances is exactly the kind of "money oriented" decision that the article decried earlier in the article. Rather than moving to save money, the question should by where do you want to live and how will you have enough money to do that. That may mean moving to a warmer climate and adopting a new set of friends and activities. But, just as likely, it means staying in your current community with established friendships and/or close to family.

The suggestion of moving somewhere for tax advantages is plainly silly. Even on a list of financial considerations, taxes ought to be close to the last item. On a list of what will provide a fulfilling retirement, it doesn't merit more than an asterisk.

The author is right in philosophy. Money is just a tool, not the focus, for having a rich life. But having said that, his specific suggestions head off in the opposite direction. If you want a fulfilling retirement, live a fulfilling life. Then make your retirement more of the same.

Comments

Popular posts from this blog

Self-Directed Real Estate IRA's the New Scam?

You aren't smarter than the market. It really is that simple. You know the marketing folks have been out talking when the New York Times does a fluff story on some new way to make more money with your investments. So watch out for the new scam promoted by the same media advisers who told you a few years ago to buy the most expensive house a lender would finance. Paul Sullivan story is about people'e successful investment of their retirement money in real estate using a self-directed IRA. He provides us with several "success stories".  Of course they are all recent converters to this idea and, not surprising, all but one of the people whose story Sullivan tells are also in real estate sales. The problem isn't really Paul Sullivan. Its that there is no one who makes money by digging out the horror stories from people who invested their retirement funds in real estate at the height of the housing bubble. There aren't any public relations firms devoted to de

The Stock Market hasn't gone up, the Value of the Dollar has Just Gone Down.

You aren't smarter than the market. It really is that simple. The New York Times had an article about the stock market's recent gains. The story noted that while the market had gone up 11% since the election, the dollar had dropped 10% against a basket of foreign currencies during that same period. They described this as "almost a mirror image." Unfortunately it is exactly a mirror image for people who hold those foreign currencies. Lets say they paid a $100 for a share of stock the day of the election and they exchanged 100 units of their own currency for that $100. Now if they sell that stock they will get $111 dollars, but when they exchange that $111 dollars, they will get back 100 units of their own currency. They have earned nothing, in their own local currency's terms the price hasn't changed. In a world investment market, the price of stock is set by what people around the world are willing to pay for it. Most people are still paying the same pr

Who is to blame for this mess?

There seems to be a lot of discussion to who is to blame for the financial crisis. But an awful lot of the media coverage is highly misleading. Here is synopis: 1) The meltdown in the financial market had little to do with people getting mortgages they couldn't afford. The collapse of the mortgage backed CDO's was caused by the collapse in the value of the houses which provided the collateral. It turned the mortgages behind the "collateralized debt obligations" (CDO's) into mostly un-collateralized debts. The result was that they went from AAA rated bonds to junk. 2)So what caused the housing bubble and collapse? Many people blame the fed, but don't have the story right. The fed did play a role. By keeping interest rates on Treasury Bonds low, they provided a market for alternative bonds that would pay a greater return. But the major cause of the housing bubble was the creativity of the investment banks. These are not the retail banks that make home mortgages