Social Security in Crisis

The President told a small group gathered in Ohio that, “Social Security is not in crisis.”  This does not seem to be the consensus of many in the Sunshine State.  As the cost to live increases, many Floridians have to make hard decisions as to how they are going to use their small allotment.

As we move into the second decade of the 21st century, there seems to be a problem those who framed the idea of Social Security in 1935 did not consider: the shrinking population of viable contributors.  In 1935, they did not anticipate the post-war baby boom.  Now, as the baby-boomers start considering their own retirement options, those behind them paying into the system have diminished to the point where many wonder about the survivability of the program.  Another factor is the exceptionally high national unemployment rate.  With workers not paying into the system, the system becomes weaker still.

As of June this year, the average retiree is collecting $1100 in Social Security retirement benefits – after working a lifetime and paying an average of 12 percent of their income into the system.  What would they have been able to do if they had control over their money themselves?

Quickly throwing in numbers into a spreadsheet shows interesting results.  We assume a worker starts with an annual salary of $2500 in 1962 with an average annual increase of seven percent.  If the worker took 12 percent of his salary and invested it semi-aggressively maintaining an average return of 10 percent over his working life, at the age of 66 he would have access to a total of $765,431.

When retiring at 66 and becoming less aggressive with his investments, say averaging seven percent interest for the remainder of his lifetime, he could draw $7000 a month until his death at 81.  This is, according to the Social Security Administration, how long he can expect to live.  At that time he would still have $1000 remaining in his account.

In the 15 years the average working individual lives in retirement, he or she could have a total of $1.2 million at their disposal – had they had control over their own money.  With the government keeping watch over their funds, however, they will have access to a total of only $198,000 during those 15 years.

Many of us living down here in the state of the newlyweds and nearly deads don’t see the justice in this.  Many believe for all the money paid into the system, we are not getting our money’s worth in return.

Maybe President George W. Bush was right – maybe we should have had control over at least some of our money.


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