ETRs dont believe in traditional retirement. We think its a mistake to count on the government – or even the value of savings – when it comes to our future well-being. The cost of living is always increasing, as are the ways our wealth is taken from us. Personal taxation now claims half or more of what you earn if you are earning a good income. And as our legal system accommodates more and different claims, including civil forfeiture and frivolous “public-interest” claims against businesses, the assets you create will be eroded by either settlement or insurance. To top it off, the government has never done and probably never will do anything serious about the national debt. Recent improvements in the national budget picture are mainly the result of an unprecedented economic boom and a bubble economy, which filled up the tax coffers. (There was no net reduction in spending and no sound fiscal administration, either by the Clinton administration or by the Republican Congress.)
In a recent issue of The Remnant Review, Gary North takes this issue one step further. He says that the federal budget surplus is a multi-trillion dollar political fraud. He writes, “Social Security and Medicare required $1.5 trillion in fiscal 2000 and an equal payment in every fiscal year for the next three decades in order to amortize their off-budget, unfunded liabilities. Every year that is delayed, the unfunded liability gets worse, as the fiscal years deferred repayment gets tacked onto the total combined debt. In fiscal 2000, the total unfunded Social Security/Medicare debt was $20 trillion. But it was not dealt with. The $1.5 trillion required was added to the $20 trillion total. In fiscal 2001, unfunded liabilities are $21.5 trillion. The money required to amortize this is about $1.6 trillion. But this will not be allocated. So, this deferred $1.6 trillion gets added to the unfunded $21.5 trillion: $23.1 trillion.
Then in fiscal 2002 . . . .” In real estate circles, this delayed-payment procedure is called a “backward-walking mortgage.” Say that a homebuyer pays less than what the monthly amortization payment requires. Whatever portion of the monthly bill that is not paid that month is then added to the principal owed. The longer the homeowner continues to pay less than what he owes monthly, the larger his total debt becomes. At some point, the mortgage firm repossesses his home. He loses whatever equity he had. He’s back on the street again. The American government is the homeowner, and we, the taxpayers, are the creditors. We keep giving the homeowner more credit, and he keeps getting himself further into debt. Of course, since we have no home to foreclose on, all we can do is evict the incumbents. But their replacements will not have money in the Treasury to pay off the “mortgage.” They will then have two choices: Either admit that the government is bankrupt or tell the Federal Reserve System to create sufficient fiat money to meet Social Security and Medicare payments. They will probably do the latter. Then they will change the law and kill the COLAs (cost of living adjustments). They will be able to pay off the creditors – you, when you are retired – with Social Security checks that are worth less and less with each passing year.
If you haven’t already done so, do this now: Accept the fact that you will need to earn income actively for the rest of your life. Forget about the fraudulent and improbable dream of living off your retirement nest egg. Recognize that you need control of (and involvement in) an active, income-producing business for the rest of your life. Dont worry about working yourself to death. Controlling a business doesn’t mean it has to control you. Imagine a future in which you have both passive income from your retirement investments and active income from a business that you enjoy. Imagine how comfortable that will make you feel. And you will still have all the time you need for golf and bridge.[Ed. Note. Mark Morgan Ford was the creator of Early To Rise. In 2011, Mark retired from ETR and now writes the Palm Beach Letter. His advice, in our opinion, continues to get better and better with every essay, particularly in the controversial ones we have shared today. We encourage you to read everything you can that has been written by Mark.]