June 04, 2018Individual Investment Management

Why Social Security Matters.
6 Reasons to Preserve It!

Social Security (or SSDI as the program is officially known) is an incredibly important tool to supplement retirement for the majority of Americans.  Here are 6 reasons to preserve it:

1.  It's not an "entitlement:"
Despite its image as a hand out, SSDI is an earned benefit you pay for.  Every working day of your life, both you and your employer contribute to this program.  Even though the benefits are used to support current retirees, a portion of your money is placed into a fund that owns government treasuries and will be used for your future benefits.  This represents a small down payment on your own future annuity that is owned by you alone!

2.  It prolongs your savings:
Over 20 years I have run countless retirement simulations and evaluated literally thousands of financial situations.  In virtually every case, the presence of an earned pension from social security prolonged a person's livable savings pool by 10-15 years.  This can mean the difference between retiring with dignity or a retirement in poverty.

"In virtually every case, the presence of an earned pension from social security prolonged a person's livable savings pool by 10-15 years."

3.  Yes...it's actually well run!

The retirement program within SSDI has an average annual admin expense of about 0.50%.  This compares quite favorably to mutual funds and is half the cost of your average variable annuity.

4.  Few have pensions anymore:
Approximately 17% of Americans still have pensions.  This is historically low and continues to fall.  401k plans and IRAs were never intended to fully replace your earnings in retirement.  Social Security fills this valuable gap.  

5.  It's easier to fix than you realize:
Currently all Americans pay SSDI taxes on up to $128,400 of earnings.  Many studies have shown that by raising this cap in combination with other fixes could add another 60-70 years of benefits.  These fixes include raising the retirement age, tweaking benefit packages, re-indexing the inflation adjustment, or very modest payroll increases on those earning $1M+ annually.

6.  It saves your family money:
When children or family members are forced to cover the life expenses of their parents, it represents an economic drag on the economy.  These individuals are forced to delay or forego their own investments, home purchases, higher education, or large purchases that are economically simulative.