I get so much bad info from talking with some of my friends that from time to time, I need to take the time to check out the facts. Life expectancy and Social Security is just one area. Rather than join the crowd, I have tried to get my own data and make my own evaluation to determine if it is a problem or not and what is the cause and what might be the solution. I went to the Internet just like you would have done.
I was surprised to find out that our USA ranks 38th in terms of life expectancy. That means that 37 other countries have it a lot worse when it come to old people. Our average life expectancy is 78.2 and Japan who is in first place is 82.7. Even Canada who beats us on almost every thing also beats us on life expectancy at 80.7 and ranks 13th in the world. Does this mean that Canada has a much bigger problem than we do? I don't think so. I did find some other numbers that might be of interest. This data is for a person who is age 65 in this year and how many more years that they have. This is what Social Security is looking at. For the year 2005, a retired person can expect to live for 16.2 years. How much money do you have in your IRA? By the year 2025 the number will be up to 17.5 years. Now, a little math. That will be an increase of 8% in 20 years. I still have a little more math in my pocket. 8% in 20 years works out to be less than 1/2% per year growth. It is clear to me that living longer is "not" the main problem with Social Security. If that is the case, then why do people keep bringing this point up? It is because they don't understand the problem and go for what ever the politicians are selling. They don't think for themselves and get their own facts.
The problem is that it is not like a personal IRA where you only get out the money that you put in plus any growth. It is more like a PONZI scheme where you put in a little and they give your money to someone who never put in a penny. Further, like the PONZY scheme, they promise you more than the little money that you put in earned. It is even worse, with the money that you put in, they purchased government bonds that pay the least interest if they had more in the account than was being paid out at the time. Next, the money that you "loaned" the government when you purchased their bonds with the money in the Social Security account, they gave that money to help pay for welfare programs that purchased votes for the politicians. Now when you come along and want to be paid after you retire, the government sells new bonds to China and uses that money to buy back your original bond so that they can put the cash back into your Social Security account so that they can write checks to you that don't bounce.
Hey, it gets worse. We know that there are fewer people paying into Social Security compared to the number on retirement today compared to back in 1940, but it is not because people are living longer. That is just a smoke screen. How does it get worse? Obama came up with the plan to allow those few workers who are paying into Social Security to stop paying in. This was so they would have bigger pay checks and could keep living it up until the economy picked up. It did not help anyone who did not have a job since they were not getting a pay check. The bottom line was that there was less cash flowing into the Social Security account when we actually needed more. How is that one? The other problem is that when people get used to "not" paying their share into Social Security for a while they see the restoration as a tax increase when what we really need is a larger contribution from them. Did we make a bigger mess or what?
What happened with Social Security is classical. Here was this big pot of cash sitting in Washington DC and rather than investing it for a higher yield and keeping it separate from other funds, it was all mixed together and spent just like any other tax money. The cash that had been paid in was now just a few sheets of paper in a file cabinet in Washington DC. Had we not let the government spend that cash, they would have had to go to the people and ask for a tax increase to fund their games and it would have been rejected as not being worth it. Johnson's Great Society would never have happened. By the way, what do we have to show for all the money that was spent on the "Great Society"? I don't know either. It was just squandered pure and simple.
The only way that I see to set this straight is for voters to wise up and dig out the facts and try to dry up the well in Washington DC and not let them borrow from our children. It is not going to be long before China stops loaning them money. Loaning us money is part of the China plan to trash our economy. They loan us the money and we squander it and then they come back an collect on the loan. What do we have to pay back the loan with? How about a National Park? That is only the type of payback China will accept. They don't want more of our worthless paper money. How about Gold? I am not sure we have that much Gold. Have you or anyone you can trust seen the Gold? We have a problem and it is not because we are living longer. Remember we rank 38th in the world!!!
PS-----I am sure you could do these calculations yourself, but let me do them for you. Let's assume that you are now 65 years old and have paid into Social Security from age 30 to 65 for a period of 35 years. Assume also that you started out at $20,000 per year and worked upto $50,000 the last year you worked. You paid in 7% of you gross pay and your employer matched it for a total of 14%. Assume the money was invested in government bonds at 2% net. When you retired at age 65, you would then have a total of $244,970 in your account. Next, assume you earned the same 2% on the balance of your account while you took out money. You could take out $19,059 per year for the 15 years you would be retired. That sounds about right to me. If you had an IRA, this is about what it would have been. If you died before getting to age 65, with an IRA you could have willed the money in your account to your kids, but not with Social Security.
Just for the record, what do you think the numbers would have looked like if you earned 3% rather than just 2%? Interesting question! You would have had $296,264 in your account when you retired and you could have taken out $24,797 per year. That works out to 30% more money for your retirement. As you can see, this can get a little complicated, but it is clear that it was a 'bad" idea to for the government to invest your money in low interest government bonds. Why didn't they use the money to underwrite home loans that paid more? Some one in Washington DC was screwing you and you did not even know it.
