We have a retirement roadblock in the United States—people are not saving enough for retirement.
This is not a “doomsday prediction.” It is based on careful computations of demographics and medical trends, performed by intensively trained experts called actuaries.
We have this problem for two reasons: (1) people have a short term time horizon with respect to their own savings and the financial viability of the government, and (2) politicians don’t care either—the problems are long term, and the blame for any program failures will be spread over many individuals, while the culpable politicians are likely to be retired or working as lobbyists.
Below I discuss Social Security, state pensions, and several standard private programs, and provide my recommended approaches.
Social Security
The Trust Fund. To pay Social Security, the Social Security Administration (SSA) taxes workers and transfers the funds to retirees. The Trust Fund, (“Mistrust Fund”?), was created when the receipts exceeded the payments, because there was a much more favorable worker/retiree ratio than now exists; these saved funds were supposed to be an ironclad reserve for future massive baby boom retirements.
However, these reserved funds have been spent to pay for other current expenditures. So the Federal Government (the Feds) is misrepresenting its financial standing in falsely stating that it has a financial asset, and the Social Security commitments must therefore come from future taxes.
It is true that the SSA does have a legal claim on the Treasury to repay its borrowings, but the problem is that the government as a whole is living beyond its means—increasingly more and more of its revenues will be consumed by entitlements and interest, leaving little for other functions such as defense, especially if it honors its moral (but not legal) obligation to pay benefits.
It should also be noted that the fact that the SSA owns Treasury bonds is of no consequence—when the Treasury repays the SSA, the government as a whole is merely moving money from one pocket to another pocket, and the deficiency must come from you the taxpayer.
