Chapter 6 - Social Security & Medicare Crisis

Continuation of my summarization by chapter of the book Bankruptcy of our Nation by Jerry Robinson.

So, we hear in the news all the time how quickly our national debt is growing. I'm not sure what it is now but Robinson says it was $9.4 trillion when he was writing his book at the end of 2008. Keep this in mind while we discuss the upcoming Social Security and Medicare crisis.

Do you remember getting your Social Security Statement every year, sometime before or around your birthday, indicating how much you have paid in to Social Security so far and estimating how much you will receive each year upon your retirement?

Well, first of all, the bad news is that there is no "Social Security Fund" out there where all of the money everyone is paying in is being stored and invested in their names. The money that is being paid in each week/month is being used to pay for those who are currently retired. If there is any money left over, our government spends it on something else. I'm sure I already knew this. I think I have heard this many times before during all of the discussions around fixing Social Security. Even so, it does not make me feel good to hear it again and to face the reality of what is coming for millions of unsuspecting Americans who have paid into this "fund" all their lives and are depending on it for their retirement.

First, let's tie this back to our national debt. In case you had not noticed, the national debt numbers everyone is always throwing around does not include the money that we (baby boomers who have yet to retire) have paid into Social Security, which our government used in a very irresponsible way, such that the money I paid in ( and you paid in) will not be there for us when we are ready to retire. When calculating the country's national debt, our government does not include this money that we earned, that is owed to us and that we will likely never see. (To quote Robinson, "According to the federal government's methods of accounting, promised unfunded liabilities to future citizens are not required to be included in the accounting process." Maybe that was worded incorrectly because I am pretty sure I am a current citizen, not a future citizen. Also, it is only an unfunded liability because they took the money that we paid in for our own retirement and used it for something else. In other circles, that might actually be called stealing.) In his book, Robinson quotes the total national debt, including the funds owed to us, to be closer to nearly $60 trillion, "a staggering sum that is about as large as the total household net worth of the entire United States". That's almost $200,000 for each and every citizen in the United States.

Baby boomers are those of us who were born between 1946 and 1964. I'm right there towards the end of that range:). There are approximately 80 million of us.

Here is an interesting fact. Did you know that Social Security, Medicare and Medicaid make up approximately 40% of our federal government's budget?

And now for the really bad news:
" When the U.S. Congress passed the Social Security Act in 1935 as a part of the New Deal, an estimated 42 workers paid into the system for every retiree. By 1950, this ratio had decreased to 16.5 workers for every retiree. by the year 2030, the ratio will drop to a dismal two workers for every retiree.
Today, around 50 million U.S. citizens draw a monthly Social Security check. That number will increase dramatically to an estimated 84 million by the year 2030. Today, there are 44 million Medicare recipients. But in 2030, that number will nearly double to 79 million. And by 2040, the entire entitlement system will be in a state of disrepair unless something is done quickly."

Robinson actually provides the case for Social Security going under in 2040 but Medicare will be going under by the year 2018. He also states, from the Social Security Board of Trustees' 2006 annual report, that the money coming in from Social Security will be less than the money going out by the year 2017.

Our government has no solutions for how to solve this problem and each administration so far has simply kicked the can down the road. He then goes on to say, "To make matters worse, many in the government, and in the media, are proposing that we should solve this problem with more spending. The logic goes something like this: by spending more money, we can grow our economic productivity and outputs to levels that will help us pay off our massive debts. Anyone who thinks that the solution to a massive debt crisis is to go more into debt is massively deceived. Consuming more and saving less will only aggravate our current problems and delay the inevitable pain that awaits us." (emphasis his)

I heard on the news today that our government has increased the national debt more in the past six months than had been done in the entire 30 years before that.

Here is my spin on this. Don't count on having any retirement from the government. Also, remember that any money saved in a 401K or IRA account are controlled by the government. Remember that our government is going to be desperate when they are up against a wall on this and they have to come up with something. I have read in many places that the most logical way for the government to come up with some of the money they will need is to take it from our 401K and IRA funds. Robinson discusses this at the end of his book and says it would likely happen through a heavy tax, such as a 40% tax, on those funds as we take them out. He suggests that we make sure our retirement funds are diversifiedt and that we are saving money (at least 15%) outside of these retirement savings vehicles too. We'll cover his suggestions in more detail later.

There are so many things happening these days that I thought I would never see our country do that, quite frankly, at this point I would not be surprised if our government decided to "nationalize" our 401K and IRA retirement accounts. Moral of the story: be responsible; save, save, save; be prepared.

That's it for chapter 6. I'll try to do chapter 7 tomorrow. Goodnight:).