Post may contain affiliate links more information is provided in this link.
Forge Your Wealth is meant for education and entertainment and should not be used for financial advice.
With Trump’s recent state of the union address, many people are worried about social security cuts. More people will rely on the government in the near future with retirement in question. A fifth of American adults have no retirement whatsoever, and many have very little retirement, much less enough to keep their lifestyles upheld. Is the reliance of these entitlements going to weaken your retirement?
The Basics Of Social Security
Social security is a program which “promises” a secure retirement for people in the US. You contribute 6.2% of your income (with an additional 6.2% provided by the employer) which the government puts aside for your golden years. The money is invested into US Treasury securities. The government designed social security to be a place for you to pay for your retirement and for you to be able to withdraw from it.
How The Government Really Uses Social Security
If only that was true. The government requires money to keep many of its activities going. While the government could always obtain money from taxpayers, they have a pot of money right in front of them called social security. They will take money from the reserves instead of raising taxes if they can. That is not to say that the government is stealing from social security necessarily. It makes sense because if you had a large savings account and had an income shock, you could pull money out of your savings to provide for your loss of income and pay it back later.
If you just read the last 2 sentences of the previous paragraph, you may be wondering when the government pays their debt back. They will, eventually, with taxpayer money. There’s the problem. Furthermore, social security is not a personal savings account where an individual can take money out only every once in a while. This is more like an account in which people constantly put money in and pull cash out. In other words, for social security to be stable, cash flow in must be equal to cash flow out. Cash flow out is considerably higher than cash flow in right now. Keep in mind, 10,000 Americans turn 65 every day, that is a large amount of cash flow out. Furthermore, the US government took out money so social security is starting to run low starting in 2020.
Why Is The Government Thinking Of Social Security Cuts?
Social security cuts are not anything new. In fact, despite what you may believe, it’s not just the GOP who has these cuts on the agenda. So why would they want to make social security cuts? Simply put, things are different now than they were when social security was first proposed in the late 1800s and early 1900s. People did not live too long after 65 during that time. There was not a very high chance they would withdraw from social security, much less for many years.
Now comes the problem, people are living well after 65, social security will need to be used more. The government had a time where social security was a nice reserve. They could borrow money from social security and put it back before too many people needed that retirement. That time is over. They could pay back the money they borrowed with their own money (not going to happen). Instead they will have to pay back the money they borrowed from tax payers, or start the social security cuts. The last two would, or are angering people respectively. It’s a tight conundrum, but the government dug themselves in this hole.
Are You Entitled To Social Security?
If you mean have you earned your social security because you paid into it, yes. If you mean that you are promised social security, no. In a previous post, I wrote that the government has said that they do not need to pay any citizen social security. In fact, there were many cases where the government completely denied social security to some people.
I can foresee a future where people are denied social security for lesser reasons. I could see the government denying social security in families where a member committed a felony, maybe even less. Who would hold it against the government then? I have heard people say “criminals should not receive social security benefits from a government they disobey.” That will probably be the battle cry of protesters demanding the government to save their own retirement. And the government will see this as a door to fix the mess they made.
We (Kind Of) Signed Up For This
The US has allowed social security to become what it is. We allowed this because we thought the government would take care of us when we retire. Yes, give our money to the government who cannot take care of itself, they will take care of us when we retire (extreme sarcasm notice).
Whether we see our social security dollars as tax dollars well spent or fraudulent, it is a bad idea to leave our retirement in the government’s hands.
The entire issue with social security is not yours nor any civilian’s fault at all. The concept was simple and still is, we put money in now, we go back to get money later. Unfortunately, the government does not have a good habit of leaving money sit around. Therefore, there will not be as much for you or me from social security in the future. I am not even holding my breath to receive social security when I come to retirement age.
This should be a wake up call that the government is not going to look out for you during retirement, whether you earned social security or not. That is why I have taken matters in my own hands and have invested for retirement. Almost hands down this is the easiest way to retire comfortably. In fact, the SECURE Act recently improved capabilities to form retirement funds. You could put in the same, or even less money than social security takes and retire with higher income. Take the talks from our government about cutting social security as a warning that they will not help you forge your wealth. Only you will.