Social Security – the coming debate

Now that fewer than 50% of the population is actually paying federal income taxes and well over 50% are receiving entitlements in one form or another, it won’t be long until the receivers of entitlements figure out they can vote themselves more of the money pot.  Take for example social security (SS).  Already there are two active debates; 1) should the wealthy pay the SS tax on all income rather than the current cap just north of 100 grand and 2) should the wealthy collect a SS check in retirement.  Regarding the first point, I have no problem with taxing all income or even raising the rate a bit, so long as it all gets applied to making the program solvent.  Point 2 however is a dangerous step onto a very slippery slope.

Take two people who have led parallel lives, Mr. Saver and Mr. Spender.  Both are married and each have two kids of the same age.   They both worked for 35 years at the same company in the same position with the same pay and benefits.  There was no traditional retirement plan, so Saver put the maximum he could into the company 401k plan including extra make-up contributions once he hit age 50.  Saver had his kids in a good public school, bought used vehicles and drove them for 15 years, lived in a modest home and vacationed on the cheap visiting family and friends.  Spender on the other hand contributed nothing to the 401k plan, had his kids in private school, acquired a new luxury vehicle every other year, owned in a Mc-Mansion and took the family to Europe every summer for two weeks.  Now at age 66 they are both retiring and applying for SS.  Saver’s retirement plan is well funded.  His 401k will replace 60% of his pre-retirement income and SS will replace 40% – so in retirement Saver has successfully executed a lifetime savings and retirement plan completely replacing his income as an employee.  Spender, on the other hand, is retiring with much debt and no savings.  Spender’s SS check will replace 40% of his working day income.  Spender is beginning to feel desperate and looking for someone to blame.

Now Sleazy, a politician, enters the picture.  Sleazy claims SS is going bankrupt and that the best way to save it is to discontinue SS payments to those with well funded retirement plans!  Sleazy is running his campaign on just such a promise, and Sleazy is Spender’s hero and earns his vote.  Saver cries foul, “I paid all that money into SS and saved my money instead of carelessly spending it so that I could provide my family a decent retirement – taking my SS check is not fair.”

This debate is headed your way, how would you vote?

© Terence Robinson 2013

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