(Sorry, Brad, but last week’s short column was one of a kind)
I recently received a letter from an organization that calls
itself the National Committee to Preserve Social Security & Medicare. If you are in your late 50s or older, maybe
you received the same kind of letter.
The content of the letter offended me deeply, and I know
this group is trying to scare seniors about their benefits. To quote the letter:
“The troubling changes to our country’s social safety net
appear to be inevitable, especially now, with never-before-seen political will
to fundamentally change Social Security and Medicare!”
If the above statement frightens you, then the letter has
had its effect, but it is DEAD WRONG in its inference. The real troubling facts about social
Security and Medicare are that both are broken and will soon be bankrupt
unless some fundamental changes do take place.
However, most plans being proposed in Congress for changing
Social Security do not affect anyone 55-years-old or older. They would stay on the current system. And
even those who are under 55 would have the choice to stay in the current plan
and collect benefits under the same schedule as current recipients.
You may ask, “How can that happen and not still cause the
system to run out of funds?”
The answer is that once the plan is unveiled and put into
effect, and the new conditions and benefits are explained, very few younger
people will choose to remain under the current plan. The experience of other countries that have reformed their Social
Security system proves it hands down.
For one thing, most proposals call for the funds to be
allocated to individuals, much like the IRA or 401(k) plans of today. If the
individual dies prior to starting benefits, or before collecting the entire
fund, his or her beneficiaries would inherit the difference as part of their
Social Security fund.
Back in 1935, when FDR first signed Social Security into
law, (a step we now learn he actually opposed and was very reluctant to take)
there were no retirement plans and certainly no accounts for people to save tax
deferred retirement funds. The Social
Security system was, for most people, the only retirement plan available.
Over the years since 1935, there have been many retirement
plans implemented, and the most important ones are those that enable the
individual to save independently of others and keep the funds as part of his or
her estate. Anyone who fails to take advantage of this benefit is—sorry, but it
is true—a fool! That is especially true when your employer has a matching
contribution, which many company plans do provide.
People under the age of 55 have no excuse for not saving for
retirement anymore, so Social Security should be only one part of the overall
retirement benefit. No younger person
should depend on it as the major portion of retirement income, much less the
only benefit.
How do we know that the proposed plans for reforming Social
Security will work? We have a model to
look at to see how a similar plan is working out.
The South American County of Chile put a very close
proximity of the proposed plan into effect in 1981, so they have over thirty
years of experience to relate how well the system works. I won’t go into the Chilean Social Security
plan here, but I invite you to read about it at Chile’s Social
Security Model. I will admit that
there are pros and cons on the topic, but the pros far outweigh the cons.
Now, as to the other half of the equation, Medicare, I won’t
even try to discuss that, other than to state that I don’t believe the
Affordable Healthcare Act (a.k.a. Obamacare) is the answer. My main problem with Obamacare is that it takes
away over $700 billion from Medicare in order to implement the program. That cannot be good for seniors in any
scenario. I’ll leave it up to you to
research the different proposals to reform our health care system, but suffice
it to say that some reform of Medicare is absolutely necessary in the next
10-20 years to keep it solvent.
I hope you will share this column with anyone you know who
is age 55 and older. They don’t deserve to be scared that their benefits are
going to be reduced or taken away under any plan currently being proposed in
Congress or in the current presidential campaign. It just isn’t so!
