Anyone who follows politics knows that touching Social Security is like touching a flaming hot sack of doo-doo, which is why it rarely gets discussed, let alone changed. And while a CYA from professional investors rightly says that past performance is no guarantee of future results, we can still learn a lot about how to move forward by looking backward. Let's put these two things together and see what we find on Social Security.
Here are Five Fast Facts about the last time Social Security wasn't fixed:
- 📝 Historical Background - Back in 2005, George W. Bush used his freshly won second term to launch a massive national campaign to fix Social Security. It went over like a lead balloon, and because congressmen are deeply terrified of losing their jobs, the whole thing spectacularly crashed and burned without ever getting a real vote.
- 🤏 Part Ownership - The plan involved giving younger workers the ability to put a tiny portion of their payroll taxes into voluntary personal retirement accounts, essentially letting folks try their luck investing in the stock market.
- 🤔 What If - If that reform package had passed, and a worker invested $83 per month in an S&P500 index fund starting in 2011, that worker would have well over $100k saved today. That's almost enough to buy a trunk full of groceries!
- 🤦 That's A Big Ouch - Assuming the S&P500's historical average of 10% return, that same 22-year-old would have lost out on over $800k by the time he or she retires! That's right, it's almost a million bucks less than Social Security's real returns. Commence salty tears.
- 👀 Instead, Here's Reality - Today, the system is rapidly barreling toward a massive fiscal cliff where it will soon (as in 2032) face automatic, painful payout cuts (22% or more) if leaders do not finally find the courage to step in and fix the math. Good thing courage is in ready supply in Congress...oh wait...
🔥Bottom line: Unfortunately, doing absolutely nothing means the system will break itself within the next decade, and continuing to ignore it just makes the system that much harder (and more painful) to fix before the actual crash happens. Letting people control their own personal investment accounts has some risk, but at this point what's more risky than doing nothing? Can we get some grownup politicians who will actually do something about this, please?
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