Social Security

In the midst of all the political advertisements, I finally found one that I liked. However, it wasn’t done by a candidate. It was done by the AARP showing a donkey and elephant with one request: Please fix Social Security. Like many things in Washington, I think this is a fairly easy fix, but certain groups will be disappointed. While Social Security has many issues (especially with the antiquated disability rules), the greatest fear among my generation is that Social Security will not exist when we hit the Full Retirement Age (FRA). Basically, we feel that we’re throwing money away when we pay Social Security and Medicare taxes each month as we’ll never get to use it. We believe we could put that money in a retirement account instead of trusting the government to keep it. As a financial adviser who would love to open these accounts, it pains me to say that I disagree. Going back to my last blog’s discussion, we cannot guarantee that we will save this money. We barely save for retirement now and the $10,000-$30,000 annual promise of Social Security is a great help as the middle-class millennial chases his/her retirement goals. When you look at Social Security as part of your pursuit of financial independence, then you’ll feel better about your monthly contributions. The key phrase here is “part of your pursuit” as Social Security was never meant to be our entire future; we still have to do our own financial planning.

So, how do we make sure that Social Security is still here 30 years from now? I had a finance professor that said Social Security will always be here because the elderly and people with disabilities always vote. If politicians want to keep their job, they won’t mess with Social Security, which is exactly why the problem is always talked about, but never fixed. Sure, this fact offers a little reassurance because politicians want to keep their jobs, but it still doesn’t solve the problem of the Social Security funds running out!

The obvious first step is for the government to stop stealing from it. I believe this problem is under control now, but we still need to keep an eye on it. After all, it’s our money!

Second, Social Security needs to keep similar rules. Step 3 will add new money to the Social Security Fund, so it will be important that certain rules, such as the max amount received per household, remain the same. Of course, the amounts will continue to be adjusted for inflation. These rules are vital with the new money because we don’t want politicians to get any new ideas for use of our money.

Step 3 is “Insanely Simple” to quote the title of one of my favorite marketing books: Eliminate the Social Security tax limit on income. Did you know that once you make over $118,500 (in 2015), you no longer have to pay Social Security taxes for that year? Most middle class Americans don’t know this because we never reach the limit. Therefore, eliminating this rule will not hurt the middle class at all. In fact, it will actually help preserve their future because it will add to the Social Security fund. Think about it; if all the celebrities paid Social Security taxes on their entire $10 million salary (for example) instead of only on the first $118,500, then shouldn’t that put the money we need in the Social Security fund? It’s really not that complicated.

The wealthy may be disappointed, but I think they will find comfort in paying a tax that helps the future of their fellow man. This is so different from income taxes that go to the whims of a politician. This money goes to keeping a promise made to Americans years ago. I have met a few pro athletes and celebrities over my life and I have never met anyone that didn’t appreciate their blessings and want to help their fellow man. Of course, they didn’t want to just give everyone money to throw away, but they love helping fulfill a need in the community. Preserving the Social Security promise is a need that can benefit all of us. It’s not about the right or the left, it’s about the future of ALL Americans.

Again, Social Security is only a piece of your financial independence, so we need to start your financial plan as soon as possible.

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