When I was practicing as a financial planner, it was sad to see so many people unprepared for retirement because they have been counting on SS for so many years. I would constantly meet with people in their 50’s who were ready to start planning for their retirement, and I would say about 80% had less than $10,000 saved for retirement. They came to me looking for answers on retiring only to find out that SS will replace only a fraction of what they were bringing home, and if they were lucky enough to have a pension, they might possibly be able to replace 50% of their income. This came as a tremendous shock to most and their retirement dreams were crushed.

But, I agree, SS was never meant to fund someone’s retirement completely, but people have looked at it as just for for so long. There has been no real pressure to save your own money for retirement, so why would you when you knew you had SS coming your way?

It is going to be a long and painful shift from the mentality of a government sponsored retirement to personal retirement savings and it will be interesting to see how the next 10-20 years play out.

Details: Happen to agree with you in part, Jeff. (I hope I wasn’t a jerk hammering on a personal responsibility agenda.) Agree that what can go wrong will go wrong for *somebody*, but not for *everybody*. Social Security seems to be too pervasive. I for one neither need nor want it, and I’ll bet that’s true for most (> 50%) of the people. And I do realize that there are other aspects to Social Security. I am only addressing the retirement benefits here.

I mentioned this in the light of the topic of personal credit that Jeremy posted. There is no pervasive, national program to bail Americans out of personal debt, is there? And why should there be? If there are no hard consequences, people will not have to endeavor to avoid those consequences. There are state welfare programs, but those are not pervasive, i.e. one has to be in need now, and I don’t think welfare programs pay off credit card bills.

*In my view, failing to fund one’s own retirement is nothing but a temporal protraction of being in debt today: it’s being in future debt, i.e. having a future negative net worth.* It’s only my opinion that Social Security retirement benefits encourage a false sense of security with respect to one’s retirement financial situation. I could be wrong about that.

I like to think of it as defense in depth:

1. the first line is oneself; for who cares more about and is better positioned to ensure one’s financial security?

2. the second line is family; after oneself, only family cares more about one’s financial well-being

3. the third line is a church or other faith or service organization; if one is a part of such a community, one helps out others in that organization when in need, and others in that organization help one out in time of need

4. the last line is government; who is the government, but all of us? if all else fails, the people have to step in and help somehow, and those best positioned to do so are those people who are closest to the one in need (local county, city, at most state)

Again, who is the government in this country? We are, of course. Why bother with layers of paperwork and various mechanisms when we all can deal with our problems more directly and more efficiently (in lines 1., 2., and 3. above), using the network of support that starts with Looking Out For Number 1? One other comment for Jeff: do you recall talk of the transition from extended to nuclear family units in the US sometime in the XX century? I’m not an historian, but I have to ponder what relationship that transition had to the 1935 Social Security Act. Extended families were (are?) an important safety net. Can anyone really convince me that a federal social security program is superior to the security of blood ties?

If the SSA still exists (I’m 37 now) and insists on sending me checks in 2039, I’ll put that money then where my mouth is now and deploy those checks according to whether 1) I need it (I won’t), 2) my family needs it (they won’t), or 3) local service organizations need it (they might). Here’s a fun little topic that Jeremy might consider blogging someday:

* take those annual (3 months before birthday) SSA “account” statements and back-calculate how much money you’d have if you’d taken your FICA contributions (just yours, not your employers’ share) and put them in a CD or money market account – just pick some rate above inflation, like 4.5 or 5.0% and then project your personal (6.2% of income) contributions compounded into the future until the point in time when you intend to start taking your Social Security payments – I’d be willing to put money on this: just taking 2 to 4% out of your compounded money market stash out each year, your payments to yourself would be higher than what you are due to receive as payments from Social Security calculated based upon FICA contributions. Run your own numbers and see if you agree. And remember that (if you find what I have found) you could do better on your own with only half of the contribution, while the SSA gets double that (one part from you, one part from your employer). This exercise alone should convince anyone that a federal program is the most inefficient way to force people to fund their retirements.

* I sometimes consider alternatives that I’d accept:
– if I was offered the opportunity to make no more FICA contributions ever, but forfeit future SSA retirement payments, I would accept that offer in an instant (presumably my employers would still be on the hook for the other 6.2% to fund the program for others)
– if I was offered the above as well as relief from my employer having to pay their share of FICA contribs, I’d accept that in exchange for a 12.4% in salary – there is zero doubt in my mind that I can more efficiently and profitably deploy 12.4% of my income than can the federal government

* Notice we haven’t elaborated on Medicare, and even deeper problem (financially). Maybe another day if Jeremy is amenable to blogging on it.

On the other hand, there’s always some jerk with an agenda that turns these discussions into a story about “lack of personal responsibility” and how we’re all getting soft because of Medicare and Social Security. It’s important to note that at one time we had neither Medicare nor Social Security, and someone from that mythical past where everyone took responsibility for themselves somehow thought they were a good idea. Maybe that great era of responsbility wasn’t so great, after all? Medicare and Social Security exist because of Murphy’s Law — what can go wrong, will go wrong, for somebody. Are you willing to let someone live in squalor when it does?

That having been said, *I* am not leaving my future up to Medicare and Social Security — even if the system were sound (it’s not — shame on us), I want to have fun when I’m retired, not merely subsist.

Often times we talk about the “power of compounding interest” when investing but unfortunately it works the other way as well. Making those minimum payments compounds the amount we owe and definitely “keeps taking” away from us.

Where is the personal accountability? There isn’t any anymore. While this article sort of touched on it, it comes down to the mentality of if you aren’t where you want to me or don’t get what you want, it is someone or something else’s fault. Of course, it can’t be because you aren’t trying or working hard enough, it has to be because you are entitled to it, so someone or something is preventing you from achieving this!

But I digress, I don’t want to get too ranty, but in summary I wanted to agree with your comments.

Regarding your comment about Gen X taking responsibility to change the US gov’t’s debt situation, I agree. I don’t see any of the currently working generations focusing on it. We hear lots of talk about reducing the deficit in the federal budget, but no talk of maintaining a budget surplus long enough to pay off that debt. The only way it gets addressed now is by maintaining a controlled, moderate level of inflation, which erodes the real value of the debt. A bit of a cope out in my book.

I don’t wish to turn this too political, but I’ll say this much: if we want people to take responsibility, we should take away crutches like Medicare and Social Security. Personal responsibility would become paramount, followed quickly by familial responsibility. After that one’s church and other non-profit orgs. Only then should governments get involved, and then only local and state. The federal government has no business holding our hands with entitlement programs. No one is going to take care of us. Always look out for Number 1! Work our asses off and make it happen — isn’t that the realist American Dream?

Gen X sends.