Burnt Orange Report

Lord knows I've talked about Social Security enough for the rest of the writers here at BOR, but I'm glad to hear about it from Byron.

There are only two things I could add to this. I'd like to point out that young people are more likely to be misinformed about the financial standing of SS just because for years it has been a great way to energize people to get out and vote. Democrats and Republicans alike have been calling for reform of the system since the early 90s, and when someone actually wanted to come out and phase out SS we've had to start talking about why there is no crisis. Just more evidence that politicians need to be more honest.

Also, Byron kind of touched on it, but I'm going to point it out, moral outrage. The reason I'm so impassioned on the subject is because I feel a sense of moral outrage that anyone would consider throwing out a system that has worked so well so that a few will benefit and more than a few will walk away with nothing at retirement. The reason SS was enacted in the first place was to keep that from happening. FDR and the Democrats realized that government had a responsibility to look out for the citizens and the plans I've seen don't do that. Those plans are clothed in greed and I think human beings are better than that; better than just looking out for their own self-interest. They want to help others, too. And that's what the Democratic party stands for.

I'm not surprise Byron's mind was boggled about Bush's plan to save Social Security. I remember the story when he was boggled when he went to Oklahoma and met the lady who loved Jesus. Just couldn't quite put his mind around that one. Now the entire Democratic party is looking to bring those Jesus-loving ol' ladies into the fold. How ironic.

Of course, here in this story... instead of hearing about what Byron has done to become un-boggled about the idea, we get a story about how he thinks young people don't care about Social Security because he thinks they like to hear about Iraq, jobs, and higher education.

Personally, I like Byron's stories. They have happy endings for the GOP. =)

Byron, You're at the best age to start planning for retirement. If you wait until you're 30, you've already missed the boat, like many of us.

Place $2000.00 into a retirement account each year from 22 to 27, equals $10K. This money will grow conservatively to $325K. If you start at age 28, you will need to contribute $2K each year until 59 to get the same return. Please remember, your debts probably aren't that great when you're young, no kids? no mortgage, little credit card problems. It a lot easier to spare the $2K each year. Wait until you're older and you've got a wife, some kids, car payments, probably more credit card debt. A lot harder to keep up retirement contributions.

That $325K will get you ruffly $16K a year for the 20 years of life after retirement. Thats not a lot of money, but say, hopefully your house is paid off and your kids are out on their own. This is $16K without social security.

All this for only $10,000.00 when you're young. If you make suppliment contributions while growing older, you can increase the $325K and have more retirement income.

I wish I had started earlier. Your last statement, "Social Security never comes up". Is true, thats a problem with our education system. Retirement programs need to start young, not when you're 30.

I've got all my kids educated about retirement and how important advance planning is. My pastor at church recently put out that if you contribute $70.00 each month of your working life for retirement, you'll have $1 million available at retirement age. Thats a cable and cell bill, which is more important?

This isn't political it's personal. You need to care about retirement. You need to.

I would like to second Peter's post concerning contributions to a retirement account. I wish I had been a disciplined retirement saver when I was younger. Alas, I was not. I contributed to social security for approximately 30 years, with the understanding that when I retired, I would receive some benefits because of my contributions.

I also understand that the contributions I made were not "mine," but were paying for the retirement benefits that my father would draw from the system.This is the nature of the system that was set up. Each generation accept a social obligation for the one that preceeded them.

As a worker in the private sector, I paid into social security for 30 years. As a teacher in Texas, I now pay into the Teacher Retirement System (TRS). When I retire (if I ever can) I will collect TRS benefits, but nothing (or a severely reduced benefit)from social security because of a law called the GPO, or Government Pension Offset.

So, the retirement plan of SS and TRS, that I had counted on when I became a teacher will not come to fruition. (Knowing about the GPO when I became a teacher in 1992 would NOT have changed my career decision.)I'm lucky. I have some savings, a paid-off house, and some investments.

I tell my students that they can retire comforably if they will delay their spending now and start saving (and investing) $100 per month until they are age 65. Most of my students spend an average of $5 per school day on lunch. Add the typical soda and candybar or bag of chips to this amount and in the course of a 187 day school year the average student has spent $1,169+ on food, alone.

If this amount was invested in a well-diversified mutual fund, this student would have little, if any, financial worries when they reached retirement age.

And this is in addition to the amount that they would receive from Social Security, and/or a private company pension.

So take it from a 53 year old high school economics teacher -- save early, and save often!

Byron: I want to comment on two specific points.

1) "There is no Social Security crisis.

2) "Social Security is arguably the best domestic program ever enacted by congress."

The first is true, only on the funding side. It's false if you view investment returns.

The second is absolutely false, IF YOU LOOK AT HISTORIC RETURNS generated by Social Security. It's 1%-2% annually vs 4%-8% via the stock market!
See 1/17/05 WSJ Article by Malkiel, page A14.

$6K annually paid into SS for 40 years is $240K. At 2%, Net Future Value (NFV) is only $362.4K. At 6%, Net Future Value (NFV) is only $928.6K. The Net Gain above $240K is $$122.4K vs $688.6K!

Social Security is currently robbing us blind. It's making the poor, poorer. The risk that opponents to private accounts are trying to avoid is actually already happening right now

Your generation, ie., our children, should care! And I'm a liberal Democrat! Good luck!