Social Security is one of those polarizing programs that none of us can do without. By none of us, I mean all of us. If you are wealthy, the fact that such a vibrant social program exists means that the threat that poverty amongst the elderly might bring to your wealth is relatively benign. (If you don’t think poverty has a negative effect on the wealth of an individual or a nation, think again.)
If you are not wealthy, the fact that there is something waiting for you despite the results of your investment ineptitude, lack of financial conviction or simply because you did not do as well as you had hoped during your working career should be a source of enormous comfort.
But there are still those that simply do not understand that this program cannot go away. It provides solace and hope. “Many of the great achievements of the world” the saying suggests, “were accomplished by tired and discouraged men [and women] who kept on working.” While I have suggested throughout the years that you not consider the program as part of your retirement plan, I’d like to take a slight reverse on the subject.
You should consider Social Security as part of your retirement plan. For three reasons: one, the program offers those who pay into it – and you do so from the first dollar you make right up until the last one you earn – about a 5.5% return on your investment; two, this contribution, half by you, half by your employer or all of it by you if you are self-employed – up to $106,800 – is conservatively invested leaving you the opportunity to take a few more risks with your 401(k); three, no matter when you begin to collect it – and for the youngest among us, those first years will get pushed further back as we continue to assess the program’s solvency, which right now is good until 2037 – it will be there.
Currently, you can tap your retirement benefits at age 62, which would give you only a portion of what you would receive had you waited until full retirement. It may not seem like a lot and it may not keep you wrapped in the lifestyle you are currently living. But it will keep you from having to grapple with the notion of poverty.
The AP reported yesterday that the report on Social Security was delayed three months because the CBO (Congressional Budget Office) wanted to calculate the effects of the historic health plan recently passed by a forward thinking Congress and signed by President Obama on the program. It may not push the tipping point back a lot. But for the vast majority of Boomers on the cusp of the program, it will offer some relief. For the rest of younger workforce, it will at least reassure us that our parents are taken care of and maybe, just maybe, it will be there for them as the hope we all know it should be as well.
Additional reading: Steve Butler and Martin Crutsinger
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