In the middle of January, the General Accounting Office (the auditing arm of the U.S. government) said that by 2017 Social Security will start running annual deficits. This is no surprise to ETR readers. I warned you two years ago, and last year too, that the supposed Social Security “surplus” was a fiction of numbers — inflated expected tax revenues from phony government accounting methods and a hugely inflated economy.

Now that the Internet bubble has burst and all those thousands of stock-market millionaires won’t be paying big taxes anymore (because they are mostly broke), the numbers that determine the retirement picture for many Americans are very grim. (If you live outside the USA, it’s probably going to be worse.) The White House and Congress are alike in wanting to ignore this issue. (It’s a future problem, not a current crisis, so why get voters agitated by talking about it now?)

But the problem is fast getting worse, because the budget itself is now in deficit — $200 million this year — and we are about to get into a war that will cost us billions. All this has led to renewed discussions of Social Security reform. One approach, favored by Bush and some of his colleagues, would allow workers to divert some of the 12.4% they and their employers pay in Social Security taxes into private accounts. Others don’t feel comfortable with private accounts. They feel more comfortable about having their (and everyone else’s) money in the hands of government policymakers and bureaucrats.

Their solution: Increase payroll taxes by 15% to 20%. That’s not going to happen. And by the time baby boomers start turning 65, in about eight years, the deficit may be much higher. It doesn’t take a crystal ball to see that the future for Social Security is grim. In fact, you’d be smart to plan on getting NOTHING out of the system when it’s your turn to tap into it. Instead, do what I do — figure out how to get the passive income you need from your own private investment funds, not from the government.

If you figure you’ll need $75,000 a year to live the way you want, be sure you have enough socked away privately to give you that $75,000. If things turn out better than it now appears they will, you’ll get your Social Security checks. Then, that money will be bonus cash that you can spend on fun and frivolous things — or you might decide to give it away to friends or charities. The main thing is to make sure that the money you need to depend on comes from the only place you can depend on — your own private retirement account.

[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.]

Mark Morgan Ford

Mark Morgan Ford was the creator of Early To Rise. In 2011, Mark retired from ETR and now writes the Wealth Builders Club. 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.

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