OASDI

As most of you who follow this group know, I'm in the business - like a lot of other posters here. Also, like a lot of others here I've had some run ins lately with some of my clients, especially about Social Security and how it works. So for those who don't know, I thought I'd post a little information on the program. I'm hoping our esteemed moderators will allow this post, while it isn't a question I think it does supply good information that is pertinent to financial planning.

Life expectancy at birth in 1930 was 58 for men and 62 for woman - due mainly to high infant mortality (about 60 per 1,000 live births. I could not find data on still borns or miscarriages -

In 1940, the majority of Americans who made it to adulthood (age 21) could expect to age 65 - 53.9% for men and 60.6% for women. The average remaining live expectancy at age 65 was 12.7 years for men (to age 78) and 14.7 years for women (to 79). This addresses life expectancy but NOT quality of life or ability to work. An early, limited form of Social Security began as a measure to implement a "Social Insurance" during the Great Depression when poverty rates among Senior citizens exceeded 50%. The Social Security Act itself was an attempt to limit what were seen as dangers in the modern American life, including old age, poverty, unemployment, and the burdens of widows and fatherless children. Let's look at Average Life Expectancy at Birth for our more modern times -

Born in 2005 - average combined life expectancy is 77.8 -

Born in 2009 - average combined life expectancy is 78.1 - Projections for those born in 2020 - average combined life expectancy is

79.5 - What's also interesting is that for those that ARE age 65 now, the average life expectancy is another 21 years, based on the IRS Single Life Tables for use by beneficiaries. IRS Publication 590

The Uniform Lifetime Table from IRS Publication 590 shows the distribution period (assumed life expectancy) for someone age 70 now to be an additional

27.4 years.

So someone in their late 60s, in good health, can expect to live another 20 to 25 years - until they are will into their late 80s or early 90s.

What does this mean to us, today, and how does it integrate into financial planning?

Social Security was never intended to be a full blown retirement program. It was ONLY intended as a stop gap to try to make sure that the aged, widowed and orphaned would not have to live in poverty. Remember, this happened at a time after the GREAT Depression, when there was 25% unemployment (interestingly at a time when the average wage to working Americans actually increased in a lot of sectors).

The system was designed to pay out when you reached age 65. While it was true that if you lived to age 65 you stood a very good chance of making it to your late 70s, but we've seen from SSA's own web site, ONLY 54% of men and 60% of women were expected to live that long. The ones that made it to age 65 were only expected to make it to 80 TOPS. Additionally, those that lived that long were not nearly as healthy as we are today.

I've read articles that say there will be little difficulty in living well past 100 and perhaps to 120 or more in the near future (not for me, I'm more than half used up already , but perhaps for my yet unborn grandchildren?).

Many are concerned that Social Security won't be there for them when they need it - to which I say BULLS**T! The system will not collapse, the government won't allow it. They will make whatever changes they need to make to make sure the system remains intact.

This may mean that retirement ages will be pushed back further - remember, only about half of Americans actually made it to retirement when the system was built.

This may mean that the cap on Social Security Contributions will be raised (like it is every year) OR that it will be removed completely (like it was on Medicare).

This may mean that the government takes over the economy and produces chits (for you young'uns that's a piece of paper) that can be redeemed for food and medical care (if this sound like welfare, it is - insert your favorite program here - food stamps, unemployment - medicade) to prevent the aged and poor to be able to eat.

It may mean a combination of things already considered and those yet to be thought of.

But what it really means to those planning for retirement is this - You'll get something from Social Security BUT it will NOT be enough to maintain the lifestyle you have now - regardless of how bad your current lifestyle is. If you're not making much and barely getting by, you need to know that what you'll get out of Social Security is based on what you pay in - paying nothing or just a little bit in and that is what you'll get out. This won't be so bad for our poor - afterall they're already used to living on the street and eating out of garbage cans.

BUT for our middle and upper class retirement may be devastating. Many boomers have failed to save for retirement. And if this isn't bad enough, they've taught their children the same financial values so they aren't saving for retirement either. Hence, while our generation has become knows at "The Sandwich Generation" because we're raising and spoiling our kids and trying to care for our parents, we are making a bad situation worse for ourselves.

When we can't work any longer (read that generate a pay check) WHO will take care of us? Our parents will be dead and our kids may be deadbeats!

Social Security WILL be there - but if it is ALL you have, you'll be sorely disappointed.

Gene's First Rule of Retirement Savings - save till it HURTS and if it doesn't hurt you aren't saving enough. If it does hurt now, you'll get used to it AND when that happens you need to ratchet it up and save more!

I'll get off my soapbox now.