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The Future of Retirement Income: With or Without Federal Social Security?

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  • Retirement is often decided on the basis of having enough supplementary income from Social Security to meet your needs for the foreseeable future. That already means that it is in addition to other resources for most people, but certainly not all. Too late, by most accounts, at least two major errors have been recognized as bring about the collapse of Social Security as a real time self -funding program. One being the advent of a large demographic one-step change(the post WWII ”baby boom”), and the other being the “borrowing” of the cash reserves for other federally funded programs.

    This brings us to the crossroads of terminating or sustaining the federal role in the retirement income of Americans. Obviously, today the federal government has a commitment for the funds being collected by the Social Security Administration and must sustain those commitments until the program is changed to prescribe how future collections will be committed.
    That is essential to the ‘full faith and credit of the United States’ needed to function in a monetary system. Choosing termination or sustaining must be decided first to set the course, and that requires complete separation from consideration and funding of Disability and Medicare support programs.

    Choosing Termination

    Termination is possible by a stabilizing stepwise rollover from adding funding into federal Social Security to adding funds into a personal mandatory minimum retire account (MRA). The federal government should issue a Social Security Bond as a major component of the MRA that can be completely rolled over to an IRA after 25 years or distributed to the estate of the deceased upon death. Such bonds are to fund the Social Security Administration as attrition diminishes other income all the way to extinction.
    Everyone would still make a small contribution to Social Security until the SSA extinction, but with no benefits accruable after the activation of the MRA by the enabling legislation.

    When the SSA has progressed to extinction, the mandatory Social Security Bond issue would cease new issues and be paid out to extinction. Then the federal government will have prescribed mandatory individual responsibility for retirement and made itself independent of the cash flow regardless of demographics or the funding of other federal programs.

    Admittedly I favor this approach.

    Choosing Sustaining

    To sustain the retirement benefit of the SSA, the SSA must be separated from Disability and Medicare programs for transparent and accurate accounting. The benefits are still a contract between the individual and the federal government at the time of the contribution and any alteration of benefits requires a proration of benefits before and after any changes.

    The issue then is the changes. Obviously this must come down to an increase in income and a decrease in benefits. Increasing the SS withholding, extending the retirement age, and rescaling the pay rate to favor late retirement will do most of the job. We can introduce the concept of age disability to move people unable work at advanced (but pre retirement) age to a disability category funded outside of SS.

    Further, to stabilize SS income, the federal government should fully fund the SS trust fund by the issue of tax-free bonds as soon as possible. The money has to be in the right pocket to recognize who has the problem and how “big” the problem might be.

    I leave out ‘means testing’ because there absolutely will never be a bipartisan majority for it and you wouldn’t want to live in a country where there was.

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