The Obama government is watching Social Security be destroyed and has not made any plans to save it.
Social Security Landslide
By Greg Boots
Social Security is the foundation for most Americans’ retirement. This foundation has been built on shaky ground and what started as a falling rock has progressed into a full-blown landslide.
This time each year the Trustees of the Social Security and Medicare Trust provide the details of the account balances. Prognosis is bleak. As it currently stands, the Social Security system will be exhausted in 2033; this is a dramatic three-year increase from last year’s report. Social Security is a “pay as you go” system, which means that those of us who are currently paying into the system through our wages are unlikely to see the benefits we have been promised because our money is going to provide coverage for those who are currently drawing from the Social Security fund. As a 42-year-old worker, my expected retirement date is 2037 and unless the system is dramatically overhauled my best-case scenario will be to receive 75% of my promised benefits.
The biggest hurdle is that the problem must be fixed now, while there is still time. Earlier this year top officials from government and retirement sectors met to strategize on how to shore up the foundation before it was damaged beyond repair. The conclusion they came to was that there is a deficit between what Americans need for retirement and what they actually have. The deficit? A mind-boggling 6 trillion dollars. To give you some perspective on how large this number is, imagine stacking Dollar Bills on top of each other 6 trillion times. It would reach from the Earth to the Moon and then half way back to Earth.
Unfortunately the bad news doesn’t end there. The end of the Social Security’s Disability Fund has also moved forward by two years and is set to expire in 2016. What does this mean in real numbers? In 2011, 55 million Americans received benefits from a fund that has only four years left in its shelf life.
Thankfully, all is not lost. We all have it in our ability to provide for our own future independence and well being when it comes to retirement. There are several options when it comes to IRAs and Roth IRAs. However, if you are looking for greater control and flexibility, I strongly recommend exploring a Qualified Pension Plan. Qualified plans have several distinct advantages over IRAs, both Roth and Traditional. Unlike an IRA where you have to have a custodian, in a properly structured Qualified Plan you will serve as the Trustee of the plan assets, and why not, didn’t you work for those assets? Shouldn’t you be the one in control? As Trustee, you are not solely limited to mutual funds and covered calls. As Trustee, you can invest in any stock, future or option you deem as a prudent investment.
If you are like many of my clients, you also desire to capitalize on our current real estate market and use it as a catalyst to supercharge your retirement. In an IRA, the custodian must be involved in the real estate transactions and you are limited to only being able to have a non-recourse mortgage, which can be difficult to obtain and cost prohibitive. As Trustee of a Qualified Plan, you can simply write a check for the purchase of the real estate without the involvement of any outside parties. Additionally, you can acquire properties using traditional mortgages, which allows you to leverage the funds within the plan for accelerated growth. Another distinct advantage of a Qualified Plan is that as a participant, you can borrow from your vested account balance and use those funds how you see fit.
As today’s Social Security and Medicare Trust Report dramatically demonstrates, it is time to take control of our own retirement options. How can we build for our future when our structure is built upon unstable ground? It would be foolish to sit idly by and hope the system fixes itself.
