Social Security and Medicare: The Money is Running Out

Bad news from Social Security and Medicare, the money is running out earlier than expected. The new numbers? Social Security date is 2036 and the Medicare date is 2024.

Whoa, Muck! That's like a million years away!

From an investing stand point, it is really sad that workers pay 12.4% into Social Security over their working years and get so little in return. Imagine your portfolio if you had invested 12.4% of your income into the total stock market index fund from age 18 to 67. You'd have a lot more money than Social Security will pay you.

There will be those who suggest that the employers pay half of that 12.4%. However, it is important to remember that employers don't ever pay taxes; employers collect taxes. The taxes employers pay are a result of charging higher prices for goods and services, or paying less money in wages and benefits to employees. Social Security taxes are your 6.2% plus the 6.2% the employer extracts from you via lower wages and higher costs.

Others may suggest that Social Security is an "insurance" program for old age. Most investment advisors would suggest that using insurance as an investment vehicle is poor financial planning.

The country faces retiring baby boomers and the inability to keep promises made from an inadequate and poorly planned savings plan called Social Security. In order to fix it, promises have to be broken. Either benefits will be reduced or taxes will be increased. Perhaps the benefits will be means tested, and those who are wealthy will be excluded.

Whatever the solution is, I believe most of us would have been much better off investing that 12.4% of wages in the Wilshire 5000 from ages 18-67.