Governor Rick Perry has been taking some heat for claiming that Social Security is basically a Ponzi Scheme and following the financial crisis of 2008, many politicians that had been advocating for privatization of Social Security have been vilified. Are these criticisms fair?
As a school administrator, my wife is essentially a Kentucky state employee and as such she is not part of the Social Security program. She has a retirement account managed by the Kentucky State Teachers Retirement Fund. She actually has to contribute a somewhat higher percentage of her pay toward this fund than those of us paying into Social Security. The big difference however is that there is an actual retirement account that has her money in it. And while the amount in that account fluctuates according to the way it is invested, it is hers and will always be there for her.
Contrast this with Social Security, where there are no accounts and no actual money being saved. Payouts come from current taxes. If the tax were to stop today, there would be no money to pay retirement. The current payouts come entirely from the taxes collected from the currently employed.
So, how is this any different from having Bernie Madoff manage your retirement accounts? Bernie who perpetrated the largest Ponzi scheme in history was doing just this - getting new investors to put money into the funds and paying those funds out to the original investors. But ultimately, it was unsustainable. Bottom line is this, if a private firm were managing your retirement money this way, somebody would be going to jail.
Looking back, I would say that those advocating the privization of Social Security win. The accounts may have decreases in value with the decline in the stock market BUT in almost every case, there is still money there which will be available to those retirees. Perhaps not as much as they had hoped but it is there.
The truth of the matter is, that the government does a terrible job of managing money. And there is no reason to think that will ever change no matter who is in charge.
Just my opinion.
Speaking of which, if you would like an opinion on real estate, I would love to help. I specialize in Commercial Real Estate and am licensed in Kentucky and Indiana. I would love to help.
BTW - Keeping my broker happy, you should know that this does not necessarily reflect the opinion of my company, my broker, or any of employees of Commonwealth Commercial Real Estate, other than me, of course. AND if you have a different point of view, I am happy for you to present it in the comments.
Thanks, so much all. Have a great day!
David
David W. McCoy
Associate Broker
Commonwealth Commercial Real Estate
10444 Bluegrass Pkwy
Louisville, KY 40299
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