Gen Y Social Security Proposal
Posted by Todd Hagopian (@ToddHagopian)
Gen Y Social Security Proposal
The sad reality is that Social Security, in its current form, will never be around for most of us in Gen Y when we retire. Politicians are too scared, too ideological, or too stupid, to be able to come together and pass a compromise that will keep the system working. Currently, most sources say that the system is set to run out of money in 2039, well before we are eligible for the dollars. The system started as a Pay-As-You-Go system, which takes money from people who are working now and gives it to an equal number of people in retirement. Today, under 25% of the population is over 65, but that number will rise to almost 40% in 2040. What that means is that there won’t be enough people working to support the people who are collecting Social Security. This is the definition of a Ponzi Scheme. Money from new investors is used to pay old investors until the system collapses because there is too little “income” to pay out the expected “payments”. What started as a great program, is a great program no more. This Ponzi Scheme needs to be addressed in a major way and it needs to be done now!
No one is taking action on this issue, so I am calling on my fellow Gen Y’ers to be the solution to the problem today. I am asking you to sign a petition to forego your Social Security Retirement benefits. If you would like to sign the petition, all you have to do is make a comment on the bottom of the page in support of the initiative. All we are asking is that the politicians put together a group to study this as a possible solution to the Social Security Crisis.
Why Should You Do This?
At the current rate, you will pay 4% – 6% on your income for your entire working life. That means that a worker who averages $50,000/year could pay over $125,000 in taxes and never see a dime of Social Security if the politicians are too scared, too idealogical, or too stupid to pass real social security reform. This means that most of you will get less than 25% of that money back. In order to keep Social Security solvent, the government is going to have to drastically increase the social security tax, which will make this return on investment go even lower for those of us who will be working for the next 50 years. This is not an investment, this is a Ponzi Scheme!
What Will You Get In Return?
Under this plan, you will continue to pay the 6% until 2040, but anyone who has paid at least 10 years of social security taxes will be eligible to have their student loans eliminated after the 10th year of paying the social security tax. This means that if you start working the day you graduate high school at age 18, your government student loans would be paid for when you are 28 (you would pay the payments on them until then). Basically, this will allow the Social Security system to survive until 2040, by using our revenue to pay for the Baby Boomer’s retirement, and it will serve as an incentive for Gen Y to go back to school and get as educated as possible for two reasons: 1) The Government will foot the bill. 2) We will need the education to make enough money to fund our own retirement without government handouts.
Under this plan, the retirement contribution limits will also be removed. This will allow us to take advantage of tax-free or tax-deferred investments in a major way so that we can fund our own retirement in the future. For example, today you might only be able to put $5,000/year into a tax-free Roth IRA (Retirement account) and you cannot contribute once you make a significant income. By eliminating both of those limits, you will be able to save into a tax-free retirement account for your entire life, which will make funding your own retirement much easier, and will be much cheaper for the government than it would be to keep social security alive.
What Are We Asking For?
1) Eliminate all Social Security taxes after 2040. Eliminate Social Security benefits for anyone born after January 1st, 1980.
2) Immediately remove income limits on the Social Security taxes – High-Income people should continue to pay Social Security tax on their entire income just like the rest of us.
3) Move the retirement age up to 69 by 2030 – We are already moving the retirement age to 67 by 2022, based on the increased life expectancy, we should move the age to 69 years old. Retirement was never meant to last 30+ years when Social Security was introduced.
4) Immediately remove federally-mandated income and contribution limits from all tax-free and tax-deferred retirement accounts.
5) Put in a Federal Government Student Loan waiver for anyone who will not be eligible for Social Security (Gen Y) after they have paid into the system above x-level for 10 years.
Benefits & Consequences
1) Gen Y will have a motivation to get advanced degrees, paid back by the government, to help them fund their own retirement.
2) Retirement saving will go up dramatically once the contribution limits are removed, and every generation (including Gen Y) will become less dependent on the Ponzi Scheme we call Social Security.
3) We will not see an enormous increase in taxes in order to fund Social Security indefinitely. Gen Y will still see a poor return on our Social Security tax dollars (which is what we are giving up), but in return we will be guaranteed that these Social Security tax dollars don’t triple when legislators finally realize that they need to drastically raise taxes in order to keep the system going.
1) The insurance companies will immediately come out with Social Security programs for people who still want to have that type of protection
2) The government may eventually have to come up with lighter social programs for the poverty-level Gen Y’ers who will not (or choose not) to benefit from the low-cost education this program would offer.
3) Colleges will have to be kept in check to make sure that they don’t gouge Gen Y with higher tuition knowing that Gen Y will have a government-subsidized college education.
I am offering up this document to start a much-needed debate in this country about how to handle the Social Security crisis. I believe that Gen Y would gladly give up their Social Security checks in exchange for education opportunities, greater retirement saving flexibility and a promise that we won’t have to pay ridiculously high taxes in the future to make sure that this poorly-constructed program continues indefinitely. Please offer constructive comments/feedback and keep this conversation going until we have a solution. Thank you all for caring about this country!