Dueling Fools: Social Security Bull Rebuttal

Ryan "Let the Orphans Beg" Fuhrmann and I agree that Social Security is an important safety net, and that it's done a lot of good. So what are we dueling about? I'll just focus on one issue, disagreeing with him about this line from his argument: "[C]an we count on [Social Security] to be there for us down the road when we retire? Probably not."

I say, "Definitely so ... but we'll have to change your expectations."

Leggo my pass-through
Today's Social Security benefits are funded by today's workers -- the money goes straight from the paycheck of the caddy to the bank account of the retiree on the golf course. That's why it's called a "pass-through" program. Right now, the workers are actually paying more than today's beneficiaries receive, so the extra money goes into the Old-Age and Survivors Insurance Trust Fund.

Now, this is where things get hairy: The money in the trust fund has already been spent by your good friends in Washington, D.C. But regardless of what you think of how much those trust funds are really worth, there will still be money available to pay Social Security benefits, because there will still be workers paying Social Security taxes.

Will you receive the amount shown on the estimated benefit statement you receive each year, three months before your birthday? If you're 55 or older, I think you will. If you're younger, don't count on that full amount -- but you can count on something. I think assuming you'll receive 50% of your estimated benefit is reasonable.

The real solution
As Ryan points out, one of the biggest reasons Social Security is not financially sound is that we're all living longer. So one of the obvious solutions to Social Security's problems is to raise the retirement age. It would be nice if we could work for 40 years, and then lounge on the beach for 30 more, but that work-to-retirement ratio is financially untenable, at least when it comes to Social Security.

Now, if you want to take charge of your financial empire, then perhaps you can spend your last few decades lounging on the beach. That's the reward for years and years of delayed gratification, smart investing, and continued education. In that case, dear Fool, you'll have earned it.

Think you're done with the Duel? You're not! Go back and read the other three arguments, and then vote for a winner.

Robert Brokamp is the editor of The Motley Fool's Rule Your Retirement planning service. Check out the special anniversary issue -- "8 Steps to Ruling Your Retirement" -- free for 30 days. Just click here.

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