On Tuesday, the American Payroll Association announced that the day before, the baby boomer retirement era kicked off Monday, October 15th, when the very first baby boomer, Kathleen Casey-Kirschling, applied for social security. She will be eligible for social security benefits when she turns 62 in 2008; however, says the Association, 67 percent of Americans don’t think social security will survive beyond the baby boomer retirement era.
The Association’s online survey, “Getting Paid In America”, asked “Do you think Social Security benefits will still be available for workers in America when the last baby boomers reach full retirement age (67) in 2031?” Almost 32,000 (67%) of the over 47,000 survey participants said no, they don’t feel social security will be available.
“Employees can no longer count on social security to fund their retirement. They must take retirement savings into their own hands. 401(k) or other retirement savings options are readily available through company payroll departments and allow workers to automatically save for their own retirement with tax-free contributions, reducing their overall tax burden,” said Dan Maddux, executive director of the American Payroll Association.
Financial advisors and planners have been instructing their clientele for at least the last 15 years not to rely on social security as a significant part of their retirement, even if it does manage to survive. Their thinking, like the advocates of privatizing social security, is that a person who has the right information and financial literacy can do far better for himself by investing his money for good returns than by relying on the “social insurance” that federal social security was originally designed to be.
Critics of social security have often likened the program to a “Ponzi scheme” because the Social Security program does not invest money in anything, but merely takes money from later “investors,”– younger taxpayers — to pay benefits to earlier taxpayers, who are now older retirees. Indeed, the federal government has even diverted social security funds to finance other government activities. Social Security won’t be able to recruit new “investors” fast enough to continue paying the promised benefits to the previous “investors” as it has relied upon doing up to the present, since every year there are fewer young workers relative to the number of retirees. This is a system that cannot, in the end, sustain itself once the baby boomers begin to retire en masse and overwhelm the system.
Critics also point out that although the United States Social Security system was created in 1935, it was not the first social security program. Social security was first created by Otto von Bismarck, leader of the German-Prussian Confedaration, in 1883. Bismarck sought a way to win the support of the working people, because they were unhappy with the high taxes being taken from them in order to finance Germany’s enormous military and the high prices engendered through the industrial cartels, which enjoyed government protection and therefore did not need to compete for business.
Bismarck’s plan was to find a way to create the illusion that the people were receiving compensation from the government for their sacrifices while the government did not actually pay them anything (for it could not afford to). Consulting an actuary, Bismarck learned that most people of the time were expected to be dead by the age of 65. Thus, this became the eligibility age the Bismarck set for receiving the social security insurance benefit. Most people would never need to be paid, and those that were would mostly not need to be paid for very long; the government would keep almost all of the proceeds. The system was a flying-colors success with the working people.