Nice editorial by Kerry Meagher, but I would like to expand on it if I could.
For decades the Social Security system ran a net positive, as it was growing. Politicians on both sides of the aisle could not resist taking the money for their pet projects and throw into the Social Security account their IOUs. This has been the problem with the Social Security system and other programs as well.
Now everyone acts surprised and asks: How are we going to save Social Security? Meagher has proposed two ideas that would help make it solvent, but this, too, will fail without the necessary precautions.
What is even scarier is that approximately 50% of Americans at age 50 or above have little to no money saved for their retirement. This means that they are in for a rude awakening when it comes time to retire. In order to ensure there is something in the fund, I would like to suggest the following.
The Social Security funds must have a lockbox on it. Congress cannot be allowed to pillage the funds going forward. It must be a hands-off policy and done in a manner that only a 100% vote by Congress is required to modify it. Just as with the Minnesota gasoline tax that is 100% required to fund road projects, so must the Social Security funds that we (employee and employer) pay into the system.
Require that all federal employees (especially the politicians) are required to participate in 401(k)s and Social Security. This will be the quickest way to fix the Social Security system into perpetuity. The Social Security funds are to be secured by U.S. bonds. This will provide some interest growth to the fund.
Provide options, i.e. annuity or lump-sum payouts. This would allow retirees to be in better control of their future.
Annuity would provide monthly payments until death. The retirees funds are in essence on cruise control, and no worries as the monthly check arrives in their bank account month after month.
Lump sum would allow prudent investors to manage their money. In order to utilize this option, one must sign a release/hold-harmless waiver to obtain the funds.
Lastly, everyone should know that time is your greatest friend to build wealth. This is something that we as a society need to do: a better job teaching students, young adults and politicians the power of compounding interest. As I eye retirement within the next 10-years, it makes me mad thinking about all the money that I and my employers have paid into the system over the years and the lack of interest earned on that investment.
Thank you for the opportunity to opine.