The Third Rail of Politics

The following is a guest post by Kevin Driscoll, the VP of Advisory Services at Navy Federal Financial Group.

Social Security has long been considered the third rail of politics – an untouchable policy issue. When President Bush grappled with it during his 2004 reelection campaign and launched an initiative to create personal Social Security “nest eggs” for young Americans, he managed to do little more than burn political capital. With rare exceptions, this has always been the outcome of attempts to update the old program from the New Deal.

US Capitol - Prisma

Social Security Trust Fund

The Congressional Budget Office projects that the Social Security trust fund will be exhausted by 2029. Benefits will need to be reduced by nearly 30 percent in 2030 just to keep the system solvent. What does this mean for you? Social Security benefits tomorrow will look very different from the benefits of today—if Social Security is still around at all.

Both parties are offering temporary solutions to ensure that the trust fund will not be depleted in the near future. Officially, the Democratic platform has called for lifting a cap on the payroll tax, which would cause wealthier Americans to pay a larger portion of the program’s cost. Republicans have been resistant to that sort of expansion and have generally offered solutions that include some combination of benefit cuts, lowering the cost-of-living adjustments (COLA) and raising the age of retirement.

Retirement Savings

While a likely resolution would be a compromise between the two positions to provide a short-term solution to our Social Security crisis, younger generations must educate themselves on retirement before their “nest egg” is scrambled. As the Vice President of Advisory Services at Navy Federal Financial Group, I’d like to offer some tips and tricks for anyone beginning to plan out their future.

  • Start Saving Now: The sooner you start, the better, because thanks to the power of compound interest, time really is money. The rule of 72 is a great example. This shortcut helps you estimate how many years it will take for your money to double, based on a fixed rate of return (interest).

Rule of 72

  • Know Your Options: Kick off your retirement savings by contributing what you can to a qualified retirement account. Individual Retirement Accounts (IRAs), 401(k)s, 403(b)s and government Thrift Savings Plans (TSPs) are all excellent options that allow your money to grow tax-deferred.
  • Invest consistently: You can either set an amount using a percentage of your salary, or a specific dollar deduction. Being consistent is even more effective if your employer offers a matching contribution. On payday, this money is transferred into your retirement account pre-tax. The advantage of this, if you choose a traditional TSP, is that it lowers your taxable income.


Blogger-in-Chief here at RetirementSavvy and author of Sin City Greed, Cream City Hustle and RENDEZVOUS WITH RETIREMENT: A Guide to Getting Fiscally Fit.


  1. Vicki – in my retirement planning at The Retirement Manifesto, I’ve taken a “haircut” on my Social Security estimate for my retirement cash flow planning. I’ve taken the estimate available from the online Social Security system, then reduced it by 25%. As mentioned in this article, it’s likely cuts will come by 2030. I’ll be 67 then, and am not planning to start Social Security until Age 70. To be safe, I’m taking a bit of a reduction, “just in case”. Better to be conservative when it comes to retirement planning (I, for one, am not planning on going back to work after I retire!!).

    • “Better to be conservative when it comes to retirement planning (I, for one, am not planning on going back to work after I retire!!).” Agreed, better to err on the side of being conservative when planning. Like you, when I step away from the workforce, I have absolutely no intention of going back.

      At the end of the day, the most important thing is to recognize all the forces that might impact your retirement income and then develop a plan that tries to mitigate as many negatives as possible. While you can’t know the future, you can take what is known, make good assumptions based on history, and plan a little conservatively. If you do those things, you will likely be alright. In my experience, most people suffer from one of two conditions. Either they believe that things will just somehow work out okay if they just work hard or they know they should be doing something with respect to their retirement, but aren’t sure how to start … and unfortunately, are reluctant to seek help. Financial illiteracy and an inability to find the courage to ask questions and talk openly about money is killing a lot of people.

  2. This is interesting information James. I’d be curious to know how Social Security benefits play a role in your retirement planning. We have been hearing to “not count on them” but as we get closer to that age, we also don’t want to ignore them as we plan our future.

    • I definitely include Social Security benefits in my plan, as I discuss in a past post, Multiply Your Streams of Income, where I discuss the importance of generating passive and portfolio sources of income. My current plan calls for us to start drawing our benefits at age 65.

      While I absolutely believe Social Security benefits will be around for a long, long time – talk of the demise of the program is kind of silly if you ask me – I do believe it’s possible (probably likely) that there will be changes (e.g. increase to the income limits for contributions, reductions in benefits, adjustments to the ages, etc.) to the program over time. Which takes me back to the Multiply Your Streams of Income post, where I note that more streams are necessary because it is likely that something negative, beyond your control, will happen to one or more sources. While I believe we can live comfortably on $60,000 (present value) annually, my plan is structured to provide double that, $120,000, annually.

      • That’s perfect – the voice of reason that Social Security will not just “dry up”. We are on a similar trajectory James in terms of what we need to live comfortably. I think working toward that $120,000 annual income plan would allow us more freedom to live and give as well. I will check out those past posts of yours on this topic as well. Thank you so much for sharing.

        • Thanks for stopping by and sharing your thoughts, my friend.

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