Social Insecurity

Here's a little article about a speech Fed Chairman Ben Bernanke gave stating that young people better sharpen their financial knowledge. However, it seems to me it's the older generation who should've received this lecture 20 years ago.

Depending who you ask, Social Security is going broke tomorrow, in 25 years, never etc. With the baby boomer generation closing in on retirement age, it is apparent that social security (and Medicare/Medicaid) will be in serious trouble soon. I'm under 40 (though barely) and understand how Social Security insurance is supposed to work. Looking at the numbers, it is apparent it won't be able to give me the same benefits that my parents received. In theory, I should've been all gung-ho for the privatization plan that was popular a few years ago. However, I was, and remain, against privatization of individual accounts mostly because I believe that the only ones who would really benefit from it would be those on Wall Street. Invest the fund itself, even conservatively, in the stock market? Fine. But with each individual account there would be fees (like on our 401(k)s). Another problem is that most of us are not sophisticated investors. It takes a lot of time to learn how to invest (outside of the 1990s when almost anyone could make a buck) and most of us won't have the ability to do this. Of course, even if we do manage to invest well, my generation (Generation X) and younger figure we're not going to be able to retire anyway, unless we invest very well because of the mess the previous generation will be leaving us.

A final problem, which many of us forget, is that there is no guarantee, even if we were to take the money we pay in social security taxes and invested wisely, we would work long enough to make enough money to finance our "golden years." My mother became disabled in her mid 50s, though she had partial pensions from my late father (died young, small pension) and her job (retired on disability) she needed social security to make ends meet (that and money from my brother, sister & me).

That said, social security can be saved quite easily, without drastic cuts to those at or very near retirement by doing a simple thing: raise the retirement age. Social Security was created as an insurance system to make sure those too old to work got a few dollars to help them make ends meet. Today it is being used to finance golden years of healthy adults for traveling and playing. Back in the 1930s, 65 was near the end of a life spent doing a lot of physical work. Most people, if they made it that far, died within a few years. Today, a 65 year old can easily expect 10-20 more years of life, most of that in very good shape. Same for a 67 year old. I'd say 72-75 is a better retirement age today.

Return social security to helping those who are unable to work which includes those who are under 65 and are now disabled and children who have lost a parent similar to what the system currently provides (those provisions can be added to include those 65-75 no longer able to work). If you're currently 50 or older you can be grandfathered in (though at stages, someone who is now 61 has much less time to save extra money as someone who is 51 & that should be reflected). A nice little side benefit is that as the "retirees" keep working, they'll continue paying payroll taxes, thus adding more money to the Social Security fund while not withdrawing (or at least not withdrawing as much).

I think only one or two of my 8 great-grandparents made it to retirement age. Of those who did, I don't think they were in working shape. 3 of my 4 grandparents were all healthy when they reached 65. My mom's dad had a heart attack when he was in his 40s that left him a little weak, but still able to work until retirement age. Today, his heart condition probably would've been treated with few side effects.

Today, 65 is young. We're living longer. We're in better shape physically due to better medical care and eating habits. We can keep working, which is what we younger folks will be doing because we're going to need to even with our 401(k)s. Social Security should be for those permanently disabled by health or age, who need the money. A healthy person, can get a job or otherwise contribute to society. And, to be honest, after watching medical bills bankrupt my mother, I'm more worried about Medicaid/Medicare being solvent anyway.