Tags: Social | Security | Doomed | Reasons

Al Jacobs: Social Security System Was Doomed From the Start

Al Jacobs: Social Security System Was Doomed From the Start
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By    |   Thursday, 06 April 2017 03:14 PM

Investor and author Al Jacobs contends that the Social Security system has been flawed and doomed from the very start.

Jacobs, a professional investor and author of the book “Roadway to Prosperity” essentially opted out of the Social Security System after the Reagan administration took charge in Washington, D.C.

From that time on, Jacobs has contributed only minimally to the system, while retaining a vested interest in both Social Security and accompanying Medicare benefits from the U.S. government.

“Social Security provides necessary security for those who have worked until they are 65 and not accumulated enough savings to live on,” says Jacobs, “but for those who have accumulated the means to do without Social Security income, they’d be wise to extract themselves if they are able,” he said.

Jacobs says there are many reasons that the U.S. Social Security System was in trouble from the start.

Here’s his look at the Social Security System past, present and future:

  • The current Social Security System was part of President Franklin Roosevelt’s New Deal that came to fruition in 1935. The measure, meant to implement social insurance for the elderly and unemployed, was enacted as a result of the Great Depression of the 1930s, which wiped out the savings and income of many elderly and retirees.
  • Initial payments, limited to $30 per year, were made into the system only by employees. If the U.S. Government had a crystal ball, it might have foreseen the problems Social Security would cause. In 1940, life expectancy for all Americans was 63 years of age, thus the government didn’t expect to pay benefits to its citizens very long. Ida May Fuller was the first to receive a monthly Social Security check. She paid $24.75 into the system, lived to be 100-years-old and collected $22,882.92 during her retirement years.
  • Not all beneficiaries were as lucky as Ida May, but it was an ominous beginning for the system. Throughout the next 70-plus years, amendments were added, employers were forced to pay in and optimism that the system could roll on as it had always done continued well into the 1980s.
  • As one century faded into another, Americans began to live longer for many different reasons, and as they did, Social Security began to show signs that it couldn’t last. The system soon became a hot item on the political trail, even prompting Donald Trump to tell everyone he didn’t need the $2,663 a month. He even encouraged his fellow billionaires – and those less fortunate millionaires – to stop taking the payment. The message didn’t seem to resonate, however, as these groups of earners are collectively taking in more than $1.4 billion a year in Social Security benefits.
  • According to a Pew Research Study, since 2010 Social Security’s cash expenses have exceeded its cash receipts. By 2019 the US Treasury will start dipping into its reserves and according to the study, Social Security will pay out its final checks in 2034 if something doesn’t change.
  • Today the retirement age in the U.S. remains 65-years-old, while the average lifespan for citizens is 78 years.

Meanwhile, President Donald Trump has vowed to fix an entitlements time bomb: Social Security has a looming $11 trillion shortfall

Trump has said he will preserve Social Security, “though if he and Congress do nothing to fix the funding, the financial reckoning will be huge — as much as $11.4 trillion down the road,” CNBC reported.

The last time Congress changed Social Security in a significant way with a series of benefit cuts and payroll tax increases was in 1983 under President Ronald Reagan, CNBC reported.

To be sure, Congressman Sam Johnson, an 86-year-old Texan who represents the Dallas suburbs and is chairman of the House Ways and Means Social Security Subcommittee, unveiled a bill in December in the last Congress that aims to fix the program without raising payroll taxes.

Johnson's proposal would increase the age to receive full retirement benefits from 67 to 69, slow the growth of benefits by using a different measure of inflation for cost-of-living adjustments and cap payouts to high-income workers.

"I urge my colleagues to also put pen to paper and offer their ideas about how they would save Social Security for generations to come. Americans want, need and deserve for us to finally come up with a solution to saving this important program," Johnson said in a statement.

(Newsmax wires services contributed to this report).

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Author Al Jacobs has been a professional investor for nearly five decades, He holds a degree in civil engineering from Rensselaer Polytechnic Institute, a Real Estate Certificate from the University of California and a Certified Property Manager designation (CPM) from the Institute of Real Estate Management. He organized his own investment firm in 1968 and has since specialized in development and management of real estate, and has a deep involvement in corporate securities. His written works can be found in the book “Roadway to Prosperity” and also in several newspapers near his hometown of Monarch Beach in Orange County, Calif. Jacobs writes a weekly column for his website.

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Economy
The U.S. government misjudged the future in 1935 and botched Social Security from the start.
Social, Security, Doomed, Reasons
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2017-14-06
Thursday, 06 April 2017 03:14 PM
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