Pull our heads out of the sand and solve problemsPublished 9:23am Wednesday, August 20, 2014
My Point of View by Al Arends
It was an interesting article that appeared in the Albert Lea Tribune about the 401(k) plans and Social Security, which must have taken a great deal of research. But my first question is, who would you rather have manage your money, the government or yourself? A government that cannot balance its own budget, which is over $17 trillion in debt and projected to be over $22 trillion in debt by the time Obama leaves office, doesn’t seem to be a very good manager.
Now Social Security was a good plan that has made very few adjustments to changing conditions, and it is supposed to be far short of being able to meet its obligations by the year 2033. At that time, it will only be able to pay out 71 percent of benefits, and it will continue to deteriorate further. If I were a person under 40 years of age, I would be darned mad about having to pay in to fund current Social Security beneficiaries and then receive only 71 percent of what I was promised.
Of course, these younger people don’t have anything to fear because our government is borrowing all the money in the Social Security “trust fund” to meet its overspending obligations. If I were under 40, I would be very suspicious and darned mad.
Now, of course, one way to shore up the system is to require that people under 50 work to 70 before they get their full benefits. Let’s see, we have many public employees retiring at 55 to 60 and my parents got their benefit at 65, but I have to work to 70 before I get my full benefit. If I was under 50, I would be very suspicious and wonder if the government will ever be able to pay back any of the money it has borrowed when it is spending over $500 billion more than it is taking in from taxes. Does that mean my benefit could be zero or will they have to take more from me to pay me back? Is this a Ponzi scheme and should I be darned mad?
What are we talking about? A nearly bankrupt government managing a nearly bankrupt Social Security system where young people are to get only 71 percent of what they are promised? If I were young, wouldn’t I rather have more control over the money they are taking from every paycheck? Let’s look at a 401(k) security plans where I take responsibility for planning for my own retirement.
Let’s see what we could expect from a 401(k) Social Security plan. If you are under 30 years old and given the option to take the Social Security contribution of 12 percent of pay, and you are making $30,000, what will you have when you reach 65 without any increase in wages, which is highly unlikely? Projecting, but not guaranteeing an annualized return of 5 percent, you will have $342,247 at age 65. You will have a monthly benefit of $1,700 that lasts for 37 years, and if you die before you are 102 years old, it could be passed on to your children. They would appreciate what you left for them rather than leaving a debt as we are now doing. How much more would be in your trust fund if you start contributing a smaller amount before you are 30, like most of us did?
So, I know this is a very “progressive” idea and a good old conservative should be in favor of staying with the old “conservative” Social Security system, but I am ready for “change.” I am sure that 90 percent of people under 30 years of age, given the opportunity, would elect to be in a 401(k) Social Security system when they know the facts. We should ask them whether they want the government to invest their money for retirement or whether each individual should have the right. It is also whether you want a socialism type of society or a free market type of society where people are permitted to succeed or fail.
401(k)s have only been around for 30 years, and today it is all voluntary, no government coercion. In just 30 years, people have put away $4.5 trillion for their retirement and it’s in their own account. 401(k)s, not like Social Security, is a highly regulated business where there has to be full disclosure of all fees. The total fees for recordkeeping and money management is about 1 percent, because money managers usually refund some of their fee through a system called revenue sharing.
There is no excuse for ignorance, but if some people do not want to learn or take the time to manage their money, they have other options. They can elect to have their money in an aggressive portfolio; moderate or that dirty word, conservative portfolio. Surely, everyone is capable of making that selection and is all based on how much risk you want to take. Historically, a moderate portfolio has returned between 6 to 7 percent annually for the last 40 years. That’s no guarantee, but you have a better chance of having a much higher benefit than the 71 percent you are to receive from Social Security if no changes are made.
This isn’t going to affect me because I am over 80 years of age, but I feel so badly about what we are doing to our children and grandchildren. Let’s pull our heads out of the sand and start solving the problems that face our country. You don’t have to vote for Paul Ryan, a Republican, but listen to some of the things he is saying and then start voting for your children’s future. He isn’t pushing grandmother over the hill in a wheelchair, but he is trying to prevent our country from going over the cliff!
Albert Lea resident Al Arends is a member of the Freeborn County Republican Party. My Point of View is a column written by local Republicans and Democrats.