A Fair Way Strengthen Social Security


We currently are facing a grave issue in that the country will soon be unable to pay Social Security benefits.  The demographics that once caused far more money to be collected than was dispersed have been reversed, meaning that there will be fewer people paying into the system per person receiving benefits from the system than in the past.  Because the excess monies collected in the past were not invested or saved, but simply spent,  there will soon come a time when Social Security taxes will need to be raised dramatically or benefits will need to be cut dramatically.

The cutting of benefits has already started in that the retirement age has been raised.  An individual who died at 67 who retired in 2000 would have received full benefits for two years.  One of dies at the age of 67 in 2030 will receive no benefits at all despite having paid into the system as long as the person who retired in 2000.  This is inherently unfair.

Another idea being proposed is to start means testing of beneficiaries, such that those who have sufficient retirement savings will receive reduced benefits or none at all, while those who do not will continue to receive benefits.  This is also unfair since those who have saved and been responsible will be punished for their sacrifice.

Here is a proposal that is both fair and will strengthen Social Security:

Allow individuals between the ages of 60 and 70 to give up their benefits in exchange for allowing someone they designate to start making their social security payments to a private account for their benefit at retirement.  For example, a father could give up benefits if his daughter were allowed out of the public system.  In this case both parties would need to agree to the arrangement, such that no one would be forced to give up benefits or be forced to switch to a private account.

This would be fair for the individual giving up benefits because he or she would receive something of value in return that they felt equitable (or they would not agree to the deal).  I’m sure many people who have sufficient retirement savings and who really don’t need Social Security payments would be happy to give them up if their children or grandchildren benefitted.

The public program would become more solvent because there is currently more than one person contributing for each person receiving benefits.  Because people giving up benefits could only allow one person to opt out of contributions to the public system, when they stopped receiving payments there would be more people supporting each of those that remain in the program.  For example, if there are ten million people receiving and twenty million people paying in, there are two people paying in for each receiving.  If five million people opt out of receiving, there would then be fifteen million people paying in and five million people receiving, or a ratio of three-to-one.  The program is then be more solvent.

Please contact me via vtsioriginal@yahoo.com or leave a comment.

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Disclaimer: This blog is not meant to give financial planning or tax advice.  It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA.  All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

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