The following is a guest post from Al Jacobs, professional investor and author of the book Roadway to Prosperity.
Shortly after the Reagan Administration took charge in Washington D.C., I essentially opted out of the Social Security System. From that time on I 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. 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.
There are many reasons that the U.S. Social Security System was in trouble from the start. Here’s a 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 by 2034 will only be able to pay out 75 percent of benefits owed if something doesn’t change.
- Today the full benefit age for Social Security is 66 for people born in 1943-1954, and it will gradually rise to 67 for those born in 1960 or later. The average lifespan for citizens is 78 years.