Financial safety net forewarning: Contentious issue
Financial safety net forewarning: Contentious issue
As a member of Generation X, Social Security has always intrigued me, and the more it becomes a featured news topic in reference to this as a dwindling option for retirees, the more intrigued I become. As the blog entry title indicates with “forewarning,” this is a hotly-debated topic. Social Security does not offer enough to live on as a sole source of income, but does it help with basic elements? That is certainly up for debate. Does every cent count, for example? The fact that this is a program created in 1935 also intrigues me. Has it changed effectively with the times (i.e., inflation, etc.)?
So, who benefits most from social security in 2016? It seems fairly likely that those in their pre-teens, teens, and mid-twenties likely will not benefit from Social Security, because the funding will most likely not be there when they reach age 62-65. Inflation costs have impacted Social Security since the 1980’s, along with a few other factors, but we will get to that in due course. In my perspective, a discussion of social security benefits corresponds beautifully with a discussion of planning for retirement – i.e., 401Ks, IRAs, etc. Interestingly enough, in informal discussions with individuals who fall into the pre-teen to early twenties generations reveal an unlikely optimism regarding social security, and the assumption that this may still be in existence when they reach the ages of 62-65; even more mindboggling is the reality that many of these same individuals are unfamiliar with retirement planning. Mention mutual funds and shoulders shrug….This creates a challenging obstacle.
In these informal discussions, I have discovered that many in these generations lack a basic understanding of the role of government, and how governments assist their citizens – other than the dizzying number of news reports regarding welfare system abuse, etc. Oddly enough, in spite of news articles which may tend to indicate that America’s millennials are financially savvy, these informal discussions revealed that many neither understand nor even think about retirement and all that it entails. Note: I am not saying “all”…. Those who do not understand or unaware are in for a rude awakening, when they reach an age where assistance will be needed in financial terms if they have not planned ahead. So, if you are one of those who are reading this particular blog post, please consider researching 401K and / or mutual fund options, or at least some sort of retirement contingency plan. Find some way to start saving for your future 30 to 50 years from now. If you have children or are considering children, financial planners indicate planning for even farther into the future – to help ease the lives of future children and / or grandchildren.
In reference to financial planning options, it is also vital to consider the origin of government program funding.? Every time you work, your employer is supposed to, by law, withhold (FICA) taxes from most paychecks. As such, as an employee, you contribute to a system that, at least on paper, is meant to prepare you for life in retirement (whether that is a willing retirement or otherwise). In some cases, age results in an employee being forced to step down from the work force so that a position can be occupied by an individual from a more recent generation. (This would be a great blog post, and you will see this in the future….) After all, we wouldn’t want to have 40 to 70+ year old individuals outperforming 20 year olds. That just goes against the norm. Some humor.
So, you’re wondering and maybe saying to yourself ok, well, why doesn’t the government make more money to alleviate these very prominent issues and distribute more money, create more jobs, or do something about this crisis? Perhaps you have wondered in the past why the US provides financial support to other nations rather than highlighting and emphasizing her own. (Remember the blog post title…) So, I am not a financial analyst, nor would I ever profess proficiency in this area, but I am aware of the challenges of not only inflation, but the value of US currency. The US mint can print trillions upon trillions of dollars, but that will just cause more problems, because by overprinting an excess amount of currency, this will lower the value of the US dollar, potentially, as some analysts have contended, rendering it worthless on a universal scale. This will cause other countries to raise or lower their own value and in turn will destroy a very fragile system, which is barely holding on. Never mind Wall Street would just become a scene of chaos. Keep in mind it is not just the United States that will be affected, but the world as a whole. That is an immense amount of pressure for US officials (and for those around the world). The greater good is at stake. In the US, at least, those in charge do not have absolute power over all government actions; with a system of checks and balances, no one single entity has total absolute control. (And, yes, the mere mention of “checks and balances” is fodder for further debate….)
With that point in mind, programs such as Social Security, which arose from the New Deal 1930s efforts to help the nation heal in the wake of the Great Depression, required funding…. Similarly, other post-New Deal era programs required funding, and, from what I have read, it appears that funds originally allocated for Social Security may have been used to help jumpstart those programs (à la “double dipping”). And, of course, inflation cannot be overlooked either! Not only the nation’s debt but also world events (including the oil crisis of the 1970s, for example) have had a major impact on our economy, including the funding necessary to maintain programs such as social security. Is there a solution? Pundits have debated this for years, and it rears its head in presidential debates. The social security act is at heart a beautiful piece of legislation and worked for a short period of time, and many people have benefited from this piece of legislation. However, if you research the history of social security, it has been amended quite frequently, almost averaging adjustments of every other year just to keep the program functioning. Modern era (i.e., post-WWII) red tape exists tenfold as well with too many variables interfering with what, at least initially, was an effective system. When legislators and lobbyists try to blockade the efforts of others who may have a solution for social security (or other pieces of legislation), this just compounds the larger issues at hand. Although change will not happen overnight, and the chances are that social security will continue to deteriorate, it is important to prepare for the future (in case positive changes do not occur with social security benefits). Personally when and if I reach age 62 I myself most likely will not benefit from Social Security. Although I hope I am wrong, this would at least help out with groceries.
Let’s throw some hypotheticals out there for fun. Remember the blog post title: This is a contentious issue, and I am neither a financial expert nor involved in political office.
So, what if 1 percent could be “put back” into Social Security?
- What if a candidate were to spend a mere billion dollars for an election? Take 1 percent of the total expenditures and put that into Social Security. And, yes, campaign funding legislation would prevent this, but wouldn’t it be ideal if a candidate pledged – up front and in the public eye – 1% of her or his campaign funding to social security, and actually followed through?
- What about the diamond industry? For those who are fortunate to spend millions of dollars on a ring to flaunt on your finger for show, why not take 1 percent of that and put it into the system? Think about the benefits of just 1% of 10 million dollars….
- What about those in the so-called “one-percent” of the US population – i.e., annual single (not necessarily household) incomes of one million dollars or more, and what if these individuals donated one percent of their annual earnings? Just one percent. Once again, thousands of people could benefit from even a few thousand dollars. Shelters, foodbanks, etc. See the theme?
- Tax fraud? Perhaps these expenditures could be a beneficial addition to social security funding….
- State expenditures? It is not uncommon for money to be appropriated for countless “dignitary” dinners, etc.; alleviating some of the unnecessary expenditures may have a social benefit at the city and county levels, at the very least.
- What about the salaries of government officials? Why not reduce legislator salaries by 1% and contribute that to the Social Security funding pool?
How Does Social Security Work again?
See you in the next post!