Warren Spieker: ‘I must respond to Jon R. who writes in today’s column ‘…the system is taking in more money than it needs to pay benefits. End of story.’ This may be the end of the story for Jon, but, as a young worker, it isn’t for me. The CBO (neutral third party) has stated that without changes the system will be out of funds somewhere around 2042-2052.’

☞ Yes! But at that point, with two workers for each retiree, the CBO estimates you will get 75% or so of the promised benefit. (More than the ‘two-thirds’ you might intuitively expect with two workers instead of three, but remember that with three we currently overshoot the needs by $200 billion a year.) So the system will be out of excess funds in 40 or 50 years, but even if we did nothing – and I do think some small tweaks should be made now to fix the eventual shortfall – you would still get 75% of what’s been promised. And many believe that 75% of this promised amount will likely be more than 100% of what retirees get today. If we do nothing!

(The reason 75% of the promised amount may be more than what retirees get today – even after allowing for inflation-is that initial benefits are tied to wage inflation, which is commonly expected to outpace the cost of living – though I worry it may not.)

No one should fall for the scare tactics.

In my view, today’s young workers should demand fiscal responsibility from their government (no huge tax cuts for the rich in the midst of a war, when we’re running deficits and having to take cops off the street) . . . they should embrace the current system (slightly tweaked) both as their way of helping the parents and grandparents who raised them (it’s part of life’s bargain), but also as a bare bones safety net that they, too, will benefit from someday . . . they should rejoice that the retirement system in America is already largely privatized (IRAs, SEPs, SIMPLEs, Keogh Plans, 401Ks, 403Bs) . . . and they should absolutely contribute to those private accounts, because if they don’t, they’ll have only Social Security to retire on, and as any retiree will tell you, if that’s all you’ve got, it’s a tough life.


He’s not a dean, his name is Dean, and he was so successful growing the money under his management back in the old days that, if I remember right, he heated his New England driveway to avoid having to dig out from the snow. Click here for his important world view. (Thanks, James Karn.) It might persuade you to internationalize your portfolio a bit.


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