The Third Rail

It seems that what George Bush started, neither candidate can stop--actual planning to reform social security. It is high time this trend flowers. For too long, a system conceived in the
Depression to provide a lifeline to the truly needy elderly, has come to be seen as just another middle class entitlement. The system is seriously broken, with fewer and fewer people to pay in and more and more people taking out. Several steps must be taken, and it appears both candidates are talking about them, though neither seems to have a coherent whole.

The first thing to be done is to re-brand the system. Too many people view Social Security as a pension plan...and it is not. It should never be seen as anything but a supplement to retirement saving.

The age of benefit receipt must be raised. We are living longer, and the system must be periodically adjusted to reflect this fact. Whenever I hear people talking about how this would trap people in horrible jobs longer, I return to my first point....social security is not a pension plan.

Benefits should be means tested. Well-off seniors should not receive full benefits. The continuing fiction that social security has support because it is not "welfare" is completely undercut by the fact that a growing number of beneficiaries lives on social security so long that they vastly outstrip (plus interest) what they had paid in.

Stopping the payroll tax at $102K should end (horror of horrors, I'm advocating a tax increase). But every dollar taxed above $102K should have the ability to be invested in a personal retirement account. Additionally, those making under $102K should have the option of investing some of their money in a personal account.

Social Security is worth saving, if it is reformed. If not, then it will fail. Fact is, whenever I sit down with advisers to talk about retirement, I always tell them to eliminate Social Security from the planning. It is easier to plan that way....