Last month, US Treasury Secretary Henry Paulson said that Social Security is “financially unsustainable” and needs an urgent overhaul.
Ya think? Simple elementary-school math shows it’s unsustainable.
Paulson, speaking after a government panel had completed its annual assessment of the Social Security and Medicare benefits programs, said waves of retiring Americans threaten to soon deplete available funds stockpiled in the two programs.
“As the baby boom generation moves into retirement, these programs face progressively larger financial challenges,” Paulson said.
The Treasury secretary said a growing number of retirees and the programs rising costs could harm Americas future prosperity if Social Security and Medicare are not overhauled and bolstered.
The needs of the Social Security program, which provides retirement benefits to all Americans as long as they have contributed to the program, are less acute, however, than Medicare.
Regardless what any politician will tell you, Social Security cannot be maintained. And you can prove this by doing some simple math. So sharpen your pencils, and read on for today’s lesson.
First, some basic information to set the stage for our word problem. The Social Security tax rates have been increasing steadily for years. So let’s take someone who is retiring today at age 65. Let’s say he started working at 22 (and figure he cut grass and did other under-the-table jobs and didn’t start paying into the system until he was out of college.) That means they were born in 1943 and started working in 1965, so they paid into the system for 43 years.
Let’s say he started at a good job and made $14,000 a year (a lot back then), stayed at the same employer, and to make math easy just say that he got a 5% raise every year.
That means that he paid $115,011.88 into the system, left his job making $108,662.23, and according to this Social Security calculator is entitled to $1823 per month. Figuring this person dies at age 85, the system will have paid him $437,520, assuming no benefit increases or decreases over 20 years. (Which is highly unlikely. Social Security benefits have always gone up, but we’re looking at a bankrupting system, so they may get cut. For the sake of discussion, we’ll keep math simple and keep his Social Security paycheck at a flat rate.)
This system works so long as you have an ever-expanding workforce and a steady death age. But currently the workforce is declining and the death age is increasing. This all leads to more money going out than coming in. Using our example, he will have been given $322,509 more than he paid in. And we all pay for it in our paychecks, despite the fact we may never see a dime.
We’re in this mess because people want to absolve themselves from the responsibility of planning for retirement, and instead want Mother Government to provide for them, cradle to grave.
It is time to wake up. You are not entitled to retirement. You are not entitled to a monthly check. You are not entitled to see a dime back from the government, in any form. Contrary to popular belief, you are not entitled to happiness. You are entitled to life, and the right to pursue happiness. If your happiness means retiring at age 65, then you have to earn that retirement by making wise decisions and saving enough money for 40+ years so that you can afford to stop working.
But politicians want you to believe that they can provide you happiness in the form of entitlements like Social Security, Medicare, and prescription drugs. Just as long as you vote for them, of course. They all promise you the world, but none of them will do the math to figure out how to pay for it. And like kids at Christmas, we don’t care how much it costs as long as we get the big gift-wrapped box with our name on the tag. Never mind that dad had to take a second part-time job to pay for it, or that mom just got a pair of socks… so long as we got our big present, who cares that someone else got shafted? As long as it wasn’t us, right?
When we become dependent upon the government, we become enslaved by the government. True freedom, and true liberty, means we must break the shackles that hold us. What are you dependent upon the government for? How can you free yourself from the chains of the government? How can you free others?