Friday, November 9, 2012

The Insecurity of Social Security

When Social Security was first introduced in 1935 by Franklin Delano Roosevelt, or FDR, America’s 32nd president, it was lauded as a social justice measure that would provide funds for those Americans who ended their working years without enough money to assure the necessities; food, shelter and clothing.
Post-World War II, a period which FDR continued to dominate until his death in 1945, was marked by one of the most unusual social attitudes ever evolved. Instead of older people being cared for by their children or relatives when they were too aged or ill to work for themselves, they were sent to homes or hospices to be cared for by strangers.

To this day, some cultures are astonished by American’s rather callous refusal to care for elderly parents in a home setting, either the parent’s home or the children’s. In  Fiji, a culture where old people are valued for the wisdom they can impart, family and friends take care of the old until they die. The same is true in East Asian cultures, where Confucian tradition requires the young take care of the old, bringing elderly parents and sometimes elderly uncles and aunts into their (the childrens’) homes.

The tradition is fading, even in strongly elderly-oriented cultures like China, Japan and India, notes UCLA professor Jared Diamond. And the fade is largely due to a reverence for youth – a “youth cult” which stands the past on its head. In this, the 21st century, people are valued for the work they can accomplish, so that once a person stops working, he or she is considered a mere drain on society. This attitude also gives rise to an increasing number and kind of formal systems for providing economic security.

These alternative venues include retirement programs, some sponsored by employers, others organized by property and casualty insurance companies, into which working men and women pay until they can retire so that they won’t be destitute in their later years. In modern times, these include IRAs, qualified and non-qualified company retirement plans, and annuities (or some combination of the above). Some newer plans, like the reverse mortgage loan, are not strictly retirement plans but provide income to older people based on the value of their home less any mortgage.  

A Little History
Social Security, modeled on the 1862 Civil War Pension Program, which provided funds to disabled soldiers or their widows and orphans, was a government-sponsored initiative which supplemented private, or company-funded retirement plans in the public venue. These, offered by only a small percentage of employers in 1932 (during the Great Depression and before the United States went to war in Europe), left at least half America’s elderly either completely indigent or severely straitened.

Social Security is similar to an annuity plan, in that it pays a fixed monthly rate. The difference is, Social Security is based on the number of quarters (one-fourth of a year) that an individual worked and the wages that he/she made during those quarters.

During the 1950's and 1960's, Social Security was particularly hard on women, most of whom had stayed home during their working years taking care of a house and family. When husbands retired, homemakers lived on the same pension. When husbands or providers died, widows and orphans under 16 were eligible for a percentage of the sole provider’s benefits, but never for the full amount.

Through the Ages
As with any government-sponsored program, Social Security changed with a changing nation. From the Industrial Revolution – which saw individuals and families abandoning farms to work for industry – through the disappearance of the extended family in favor of the nuclear family, all the way to today’s “couples family,” – where married couples represent less than half of American households, and where married couples with children occupy only 20 percent of the householder niche – Social Security has been dramatically altered on the political stage.

The latest adaptation of this program, according to Forbes, indicates that Social Security is broke. This is apparently what happens when politicians and leaders are allowed access to dedicated funds, and Social Security is, if anything, an inviolable trust fund distributed under specific laws in specific amounts.
The current trust is supposed to equal $2.6 trillion. According to Treasury Secretary Timothy Geithner, though (and reinforcing what President Barack Obama had already hinted at), the checks would not have continued to go out this year if the administration couldn't work out a budget deal. This is reminiscent of the veiled threat to the American economy that supposedly would have occurred in lieu of the TARP (Troubled Asset Relief Program) initiative to bail out the banks.

Moving On 
It’s probably best that you realize how iffy the whole retirement thing can become while you are still young enough to be called a wage slave. Which would you rather have, a Beemer or a secure old age?
Perhaps the situation is not as dire as it seems. Social Security champions insist that the program is fully funded until 2035, in real money. Other supporters say that the fully funded status is good through 2020.

Though perhaps it isn't  In the first decade this century, Social Security trustees clearly (and severely) overestimated their “chicken count” from 20 to 27 percent! In dollars, this is equivalent to $520 million. That’s a lot of soup and crackers.

People my age are beginning to wonder if it’s all a giant Ponzi scheme, or if the fund has been raided to pay for the endless wars. According to a Forbes reporter, the future for Social Security is not so bright that retirees need to wear shades. In other words, time to wake up and smell the coffee, even if you can’t afford it.

What do you think about Social Security and our future?


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