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SOCIAL SECURITY - LONG TERM PROSPECTS
Question: I am in my early fifties. I can hardly believe that retirement is only ten years away. It seems very likely that I will have to take Social Security early to make ends meet. Will it be there for me when I need it?
Answer: Social Security will be there for you, but not in unlimited quantities.
It’s no secret that the Baby Boom Generation has changed much about the American way of life. And if demographers and economists are even remotely correct, Boomers will force a change in Social Security, Medicare and our whole concept of retirement.
Baby Boomers have helped grow the American economic system by being the best consumers the world has ever seen. Consumers make up about 70 percent of the US economy.
The down side to that is that Boomers have gotten so good at consuming that they’ve forgotten how to save money. The savings rate in the U.S. is hovering near zero these days.
And generally speaking, people that don’t save money don’t retire early, if at all.
If you think you are going to need Social Security to make ends meet, you are someone who should be worried not only about Social Security, but also your own personal security.
Some economists are now projecting that “age inflation” (we’re just living longer, folks) will balloon the ranks of Social Security recipients by 20% mid-century.
Social security began in 1935 as a supplemental retirement benefit. Life expectancy was much shorter then for someone who reached 65. Since people are living so much longer now, these same economists argue, the retirement age should be pushed back to 73 or 74.
Don’t hold your breath for that one any time soon. The last time such adjustments were made to Social Security, Ronald Regan was at the height of his presidential popularity and all they did was add two years, phased in over the following 20 years. Political hot potatoes like Social Security are unlikely to receive serious treatment any time soon.
But don’t tell that to David Walker. Walker is the former U.S. Comptroller General, who has made a career out of sounding the cry for reforming government spending. He thinks we’re headed for big trouble.
“The problem is that we're heading in a wrong direction” Walker said in a recent interview with The Wall Street Journal. “When the baby boom generation starts retiring, that will bring a tsunami of [government] spending that we are not prepared for. We are in a $53 trillion hole. And that hole gets deeper $2-3 trillion a year automatically, even if you have a balanced budget.”
Walker’s proposed reforms are anything but modest. He calls for reforming government spending, taxation, Social Security and other entitlement programs and our whole idea of how government should function. Modest proposals…
I think these needed reforms will come, but it will be a shotgun wedding. Americans and their politicians usually put off making hard choices until a very difficult alternative is staring them in the face. Then, courage and conviction seem to flow in abundance.
But what about you?
If spending reform and funding for the future is necessary for our government, it is even more needed for you and me. You may need to face the reality that you’ll have to work longer than you’d planned and make some needed changes now so that you can save more for later.
I do think Social Security will be there for you. But it won’t do the whole job.
Personal security is your part of the bargain. Let the reforms begin!
Byron R. Moore, CFP® is managing director / planning group of Argent Advisors, Inc. Write to him at 500 East Reynolds Drive, Ruston, LA 71270 or call him at (318) 251-5858. The information contained in this column should not be construed as a substitute for personalized investment, tax, legal advice.
Compliance references:
http://online.wsj.com/article/SB121919713080455435.html?mod=2_1581_topbox
http://online.wsj.com/article/SB121909481437450859.html?mod=2_1577_topbox
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