Retirement and Social Security

If you make any money, the government shoves you in the creek once a year with it in your pockets, and all that don't get wet you can keep. —  Will Rogers

This week my students are discussing retirement planning, and noted in their textbook that the Social Security trust fund will be depleted by 2044.

Last year the Social Security and Medicare Boards of Trustees projected that the theoretical combined OASDI trust funds will be depleted in 2033 (see table below).  OASI is Old Age and Survivors Insurance and DI is Social Security Disability Insurance.  Other components are Medicare Hospital Insurance (HI) and Supplementary Medical Insurance (SMI). [1]

According to the projection, even after depletion continuing tax income would be sufficient to pay 77 percent of scheduled benefits in 2033 and 72 percent in 2088.  Though I do not expect to ring in 2088 and may not even see 2033, some of you, my children and grandchildren may experience both!

The textbook further notes: “ . . . the government is somehow going to have to come up with the funds to make good on its pile of IOUs to the Social Security trust fund.”

Allen W. Smith, Ph.D. (Ball State and IU grad) stated that “The government has embezzled all surplus Social Security revenue, generated by the 1983 payroll tax hike, and spent the money on wars and other government programs. None of the money was saved or invested in anything.” [2].

At the end of calendar year 2014 our national debt was more than $18 trillion ($18,141,444,135,563) and has grown more than $10 billion by the end of March 2015.

Last fiscal year (October 2013 - September 2014) the interest expense alone on our national debt was $430.8 billion ($430,812,121,372), enough to put $113.56 of food, every month, on the table in front of every man, woman, and child in America.

With $18 trillion in debt and no budget at all – let alone a balanced one - it is unrealistic to believ
e that our federal politicians will work hard to hold themselves to unsustainable promises made decades ago by their predecessors.  After all, to remain in office they’ve made too many of their own.

Financial projections are never simple, but considering that a congressional representative needs to think no further then the next election we might just as well roll the dice.  Whether from “borrowing” or “embezzling”, it’s clear that there is no pile of OPM that is safe from politicians.

Rely on nothing from government.

 [1] Source: Social Security and Medicare Boards of Trustees, Summary of The 2014 Social Security and Medicare  Annual Reports <http://www.ssa.gov/oact/trsum> accessed 12/09/2014

[2] Source: <http://www.fedsmith.com/2013/05/23/government-owes-2-7-trillion-to-social-security> accessed 12/10/2014

Fraud Today, April 20, 2015

Our local CBS affiliate has provided very good coverage of the Money Smart Week events at http://wlfi.com/2015/04/14/tippecanoe-countys-events-for-money-smart-week and http://wlfi.com/2015/04/17/learn-identity-protection-at-financial-fraud-seminar.

This morning it also reported about a local business that was a victim of fraud – one in which a caller claimed to be from the electric company and the business owner, even knowing that she had paid the bill, applied nearly $2,000 to a prepaid card.

I’ve met very bright people who have been victims of fraud and in hindsight they feel foolish.  But it’s very easy to become a victim and it takes guts to publically admit when you’ve been taken.

Desperation, fear, and a sense of urgency seem to get many people into trouble, as with the Grandparent scam and the payment of phantom or nonexistent debt.  Add feelings of helplessness and hopelessness, and we’re more highly susceptible to fraudulent foreclosure services and credit card debt reduction schemes.  Every time someone does fall, it empowers the cons and puts even more of us at greater risk (and in the case of robocallers, greater annoyance).

Several years ago a local insurance agency failed to report an embezzlement, which led to what the newspaper later described as the “pass-along problem of embezzlement”.  It all came out into the open a few years later when the individual embezzled from a local nonprofit agency.  I was working in this agency at the time and had known the individual since elementary school, and never would have dreamed it of her.  On the Friday that she was escorted out of the building I was away at a conference, and on Monday I was puzzled that the normally upbeat atmosphere was gloomy.

This agency did report it, and when the investigation was completed a year later she was arrested in Arizona where she was working as a bookkeeper.  One long-time small business owner that I had talked with seemed to shrug it all off, explaining that embezzlement is just another type of employee theft.  Once you discover a hole you plug it, and then wait for the next one to spring.  Even though the agency took a lot of heat, some good that resulted is that local nonprofits learned how to tighten up internal financial controls.

Since there’s so much that is out of our control it certainly makes sense to at least control what we can.  Keep learning, and think through financial decisions with as little emotion as possible.  The fewer personal details that you put out there – and the fewer places where you do – the better.  Be vigilant, and help friends and loved ones when it looks like they’re headed for trouble.