There is literally no compelling reason for a young working American today to spend one iota of brainpower thinking about whether or not Social Security retirement will be there when the time arrives. Your best assumption right now is it won’t or, if by some strange twist of fate there is a federal program running around by that name, it won’t be recognizable to the one we know and love today. To be blunt, your best hope for a dignified, comfortable retirement has always been to create your own pile of wealth that lasts until the end of your life and beyond.
If Social Security had a Facebook account, it would soon be permanently changing its status to “historical footnote.” Here are a few reasons we believe this.
1. Retirement Age: Remember when the age to begin collecting benefits was 65? Now they’ve raised it to 67 and talk is that it will be going to 69 soon. The powers that be realized that one way to stop the arterial bleeding in the program is to get the age at which people begin to collect benefits up to a level that exceeds the average lifespan. At that point, there’s a chance it just might become solvent, and the only ones who get their fingers in the pie will be the cripples and the geezers. Brilliant? Absolutely.
2. Cost of Living: Back in the mists of pre-history, as in two years ago, the federal government used to implement a cost-of-living-adjustment (COLA), which was a percentage – based upon the annual inflation rate – that a retiree’s monthly Social Security check was bumped up. The fed sent up a trial balloon in 2010 and offered no COLA. Since there was no outright rebellion by recipients, they’re repeating the process for 2011. You can clearly expect that the amount of a check will never go up again. Factoring in inflation over forty years of your working life, by the time you’re ready to collect, if you live long enough, your monthly benefit amount might just be enough to buy a loaf of bread.
Point number two illustrates the crux of the matter why you mustn’t make the mistake of counting on Social Security for your retirement. Inflation destroys the value of almost all assets, properly leveraged income property investments being the exception, and it will make your benefit check essentially worthless. Looks to us like young American workers better learn how to invest and learn it well, because it’s the only shot they have at a comfortable retirement.
The Young Wealth Team
Flickr / Alex E. Proimos