My plan to fix Social Security

MaD dOG Sez:

Social Security is nothing more than a Ponzi scheme run by the Federal Government. It has no hope for longevity. The only way it has lasted this long is because of the massive amount of debt associated with it. The Federal Government has actually taken the basic Ponzi scheme and made it worse. They have spent all the money ever collected, and paid benefits by accumulating debt.

The problem with a Ponzi scheme is that someone is eventually left holding the bag. In this case it is future generations that will have to pay off the debt caused by reckless government spending. My plan will actually increase this debt, but it also creates a light at the end of the tunnel that is not an oncoming train. The good news is that it get's the Federal Government out of the retirement planning business all together. The bad news is, it will still take about 60 years to do it. There is also plenty of pain to spread around, and no really good way to spread it. The people that deserve to be made miserable simply would be unable to make the required sacrifices.

So here is my best effort at changing the way Americans plan for retirement.

1. Means test all Social Security benefits. Anyone in retirement that has income above $120,000 per year would have their Social Security benefit reduced on a dollar per dollar basis for any income over $120,000. So if you would normally receive $25,000 in Social Security benefits, but you have $130,000 in annual income, your benefit would be reduced to $15,000.

2. Age adjusted benefits and contributions.

A. Aged 55 years and over.

1. No change to contributions.

2. Benefits are means tested.

B. Aged 45 to 54.

1. Government to refund 25% of monies paid into social security.

a. This money MUST be rolled into an IRA as currently defined by law, but would not count toward annual contribution limits.

2. Social security contributions reduced by 25%.

a. The 25% difference MUST be contributed to an IRA as currently defined by law, but would not count toward annual contribution limits.

3. Benefits paid at retirement reduced by 25% and means tested.

C. Aged 35 to 44.

1. Government to refund 50% of monies paid into social security.

a. This money MUST be rolled into an IRA as currently defined by law, but would not count toward annual contribution limits.

2. Social security contributions reduced by 50%.

a. The 50% difference MUST be contributed to an IRA as currently defined by law, but would not count toward annual contribution limits.

3. Benefits paid at retirement reduced by 50% and means tested.

D. Aged 25 to 34.

1. Government to refund 75% of monies paid into social security.

a. This money MUST be rolled into an IRA as currently defined by law, but would not count toward annual contribution limits.

2. Social security contributions reduced by 75%.

a. The 75% difference MUST be contributed to an IRA as currently defined by law, but would not count toward annual contribution limits.

3. Benefits paid at retirement reduced by 75% and means tested.

E. Aged 24 and below.

1. Government to refund 100% of monies paid into social security.

a. This money MUST be rolled into an IRA as currently defined by law, but would not count toward annual contribution limits.

2. Social security contributions reduced by 100%.

a. This 100% difference MUST be contributed to an IRA as currently defined by law, but would not count toward annual contribution limits.

3. No Social Security benefits paid at retirement.

As you can see, with the average life span nearing 80 years, Social Security would still be paying out benefits for another 55 years at least. After that however, payout will reduce drastically and eventually become zero. Refunding payments and reducing contributions as shown will also add to the debt accumulated by Social Security. At some point Federal tax dollars are going to have to pay that massive debt.

As people are weaned off of Social Security, they will become more self reliant. The "forced" contributions to a personally owned IRA will help them be ready. There will always be people that fall through the cracks and will need outside assistance at retirement. I believe that assistance is best rendered at the state and local level.

I wish I had access to the tools that could tell me how much would be saved my means testing benefits, and how much it would cost to make the contribution refunds and lower the contributions as noted in the plan. If you have any expertise in this area, feel free to comment. Maybe the $120,000 income level is too high, or too low and would require adjustment. I also wonder if the required IRA contributions of money that used to go to Social Security would survive constitutional scrutiny.

It may not be perfect, but I think it's a pretty good starting point for discussion and debate.