Since the 1970’s, Social Security recipients have enjoyed a cost of living adjustment each year, except for the last two. Is it a coincidence that this year is also the first time that Social Security will pay out more than it takes in? It is true that over the last two years inflation has been almost non-existent. Measurements of inflation may be misleading, however. The cost of things people buy every day such as gas, food, and medical services have been starting to increase. Every one of the eight major categories that make up the Consumer Price Index is now on the rise, with the only exception being clothing.
Although Social Security was never meant to be the sole source of income for people during retirement, many of the 58 million Americans receiving benefits count this as their primary income source. A report released by the SSA in 2008 stated that 64 percent of retirees receiving benefits rely on their social security as their primary source of income. Of that 64 percent, about one third reports social security as 90 percent of their income. Even those that saved and prepared for retirement are now facing a flat stock market and rates on certificates of deposit at 1% or less. Considering all of these factors, I think it is fair to say that Social Security represents a larger portion of retirement income now than at any other time in history. There seems to be no perfect answer to the financial problems facing the program and politicians place their political future at risk if they dare touch the so-called ‘third rail’ of politics.
For those relying on a private or public pension plan in addition to Social Security, the news may not be much better. Recent reports show that many of the nation’s largest municipal pension plans may soon be broke; some as soon as three to five years from now. Private pensions seem to be as under funded as their public counterparts. The government guarantor of private pension plans has been actuarially insolvent for more than three years. The Pension Benefit Guaranty Corporation (PBGC) will likely be reporting an accumulated deficit of more than 30 billion dollars when its financial statements are released next month.
Recent public demonstrations in Europe are a precursor to what we may soon see in the United States. In both France and Greece an attempt to increase the retirement age by just two years literally caused thousands to pour into the streets in mass protests. The truth is that Social Security can not survive much longer without a major overhaul to the program. Most public and private pensions are on the verge of insolvency as well. This leads us into an inevitable war between the younger and older generations. Younger individuals will undoubtedly be required to pay more into programs like Social Security to keep benefits flowing to the elderly. The elderly will also have to come to grips with a substantial reduction in benefits in the future. How this all works out will be very interesting to watch.
With the collapse of the nation’s retirement system looming, my best advice is to begin now to develop alternative sources of income. I continue to advocate establishing a money-making website as one of the best options to consider. For more information on this, please visit Christian Internet Income.
Helping you make the most of God’s money!