Social Security was created as a wealth building tool by providing savings for retirement. It was supposed to help us supplement our income as we reach retirement age by paying us back after having paid into the system for so many years.
Now that the Baby Boomers are retiring, we see that the system has enormous issues that cannot be fixed in the short term and the long-term outlook is bleak. For the first time in 30 years, we are paying less into the system than is going out of it. It is projected to continue in this fashion for many years.
When creating a wealth building strategy, Social Security must not be taken into account. The system is bankrupt.
Social Security is no longer the cornerstone of wealth building for retirement. What happened?
1. The surpluses paid into the system by Baby Boomers were “moved” by the U.S. Treasury to cover the deficits of other Federal programs.
2. The U.S. Treasury issued “IOU’s” to the Social Security Administration to cover the debt.
3. Now that the Baby Boomers are retiring, the Administration needs to cash in on these IOU’s to pay retirees.
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What makes Social Security trust fund a total wealth-building boondoggle?
With a National Debt of over $13 Trillion, there is no money to pay back the debts to the trust fund! The only way the Treasury will be able to honor any of its IOU’s is to have the Federal Reserve print more money.
How will printing more money affect your wealth building plans?
1. Since it will dilute the value of your money, leading to higher inflation, the prices you pay for goods and services will increase.
2. It may even lead to hyperinflation. Hyperinflation is when a currency inflates at a rate of 50% or more per month. This happened in the South during the Civil War, it happened during the Weimar Republic of Germany, and recently in Zimbabwe, which is still reeling from the effects. We are at the beginning of the 19-year Baby Boom retirement transition. There were 72 million Baby Boomers in 2000. It will take more than one printing of money to cover the costs of Social Security. If your money is worth less and less, how are you going to build wealth for your own retirement?
3. According to the Consumer Price Index, prices have doubled since 1982. If the Federal Government prints money to “save” Social Security, your money may be going to the supermarket, gas pump and mortgage/rent rather than your wealth-building plan.
You need to develop a wealth building plan for your retirement that does not depend on Social Security. It is the only chance you will have to offset the potential demise of the Social Security system.