How Much Would You Pay Into a Defunct Retirement Program?

The Old Man

If you were born before 1966, you've been paying into one your entire life

If you were born in 1966, you hit the sweet spot because you will reach your full retirement age of sixty-seven in 2033, the year the Social Security Trust Fund is supposed to run out of funds.

If you are lucky enough to be born in 1966, you will have contributed 12.4 percent of your income for your entire adult working life into a program that Congress seems unwilling to save. Six-point two percent is deducted from your wages, and another six-point two percent is contributed on your behalf by your employer. That employer contribution could be paid directly to you. Instead, it is paid into the soon-to-be-defunct Social Security program.

As a current retiree, I appreciate your contribution to my retirement. You must understand that Social Security is a pay-as-you-go program, and you are funding my retirement with money that you should set aside for your retirement.

Twelve point four percent of your salary is hijacked to fund a program for current retirees while Congress all but promises the program will go belly-up by the time you need it.

Why is the theft of 12.4 percent of your earnings not worthy of protest?

Why are people born after 1966 not screaming their bloody heads off at the injustice of such a program? Instead, you sit idly by while a bunch of old men in Congress guarantees that you might as well be burning 12.4 percent of your income because the money will never benefit your retirement.

The future of Social Security rests in the hands of our very old and very wealthy representatives. Most of the people in Congress today will not be alive to witness the destruction of a venerable program that has served generations of Americans for decades. Nor do they rely on the Social Security program for their security — they have made up their own lavish retirement program, and they dare to ignore yours.

In the past, retirement rested on three pillars, Social Security, a private pension provided by your employer, and your personal savings. In 1970 forty-five percent of all workers were covered by a private sector pension plan. The maintenance of these plans was the employer’s responsibility, and employees were guaranteed a stream of retirement income until death based on years of service to the company.

“Employer-sponsored pension plans, combined with Social Security benefits and, more recently, defined contribution plans, have truly turned retirement into the “golden years” for millions of workers. So until the past decade, workers didn’t put much thought into saving for retirement, much less worrying about it.” —

In 1978 Congress passed the Revenue Act of 1978. The Revenue Act established the 401K retirement vehicle that enabled pre-tax contributions initiated by employees. This marked the beginning of the shift away from traditional employer-defined defined-benefit pension plans to employee-driven plans.

A defined benefit (DB) pension plan is a type of pension plan in which an employer/sponsor promises a specified pension payment, lump-sum or combination thereof on retirement that is predetermined by a formula based on the employee’s earnings history, tenure of service and age, rather than depending directly on individual investment returns. — Wikipedia

The Revenue Act and the advent of the 401K allowed employers to step back from providing a retirement program for their workers. Employees lost a superior program with guaranteed returns for a self-administered program that relied on the employee’s resolve to set aside funds for their own retirement.

That may sound like a good idea, but how many Americans have the discipline to save, even with the tax-deferred incentive? Personal savings rates had fallen from 13.2 percent in 1970 to 7.6 percent in 2019. COVID restrictions and travel mandates are responsible for the US savings rate shooting up to 13.7 percent in 2020. Overall I don't think the average American is capable or reliable enough to provide for all of their retirement savings.

“We’ve moved backwards,” says Josh Gotbaum, a Brookings scholar whose field is retirement economics. “If you had a pension — and let’s be clear, not everybody did — you knew that when you retired, you’d get a paycheck for your whole life and you’d know how much it would be. Now, you don’t know how much will be there when you retire or how long it will last.” — The LA Times

By 2033 as far as business and government are concerned, each citizen will be responsible for providing 100% of your retirement income. Does that look like a great plan to you? I don't think it's particularly good to have all your eggs in one basket. I was fortunate. I have a pension, Social Security, and my personal savings. No single piece would be sufficient to fund my retirement, but together they provide all I need.

It would be terrific if people born after 1966 could count on the Social Security to provide a portion of their retirement, as big business has already dropped the ball with pensions — but the time to fight for Social Security is now, not for my benefits but for yours. It's time for young people to call the government's bluff — demand that they stop stealing 12.4 percent of your wages for a program they plan to sunset.

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Looking for solutions to improve our world. I write about politics, education, climate change, and any issues important to average Americans struggling to survive in a world gone mad.

Chico, CA

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