I was somewhat disappointed to read in this months issue of BCD several statements revealing a decidedly liberal bias in the BCD. In particular, your statements related to the private investing of a portion of Social Security taxes disturbs me.

I am a self employed civil engineer and am incorporated. I currently pay around 10,000 per year in social security taxes related to my income. My social security statement says that I can expect around 1500 per month in "benefits" at age 67. If I could take the 10,000 and invest it myself for the next 32 years (I am 35 now), I would have several million dollars in my retirement fund, even assuming a very conservative rate of return. In addition, my heirs would receive the principal after I die. The 1500 monthly "benefit" is approximately equal to having a couple of hundred thousand in principal, an order of magnitude less than if the money were privately invested. Under the current system, my heirs would receive little or nothing after my death.

Your bias is also evident in your discussion of the marriage penalty and the inheiritance tax issues. What is really at issue is whether the government should own all the money, or whether the people who earn the money should own it. Our country was founded on many principles, including the sanctity of private property. Our Bill of Rights says that private property will not be taken for public use without just compensation (paraphrase). I don't believe the current social security system, or many of our taxes, are in line with this principle. I also do not believe that the tax systems we are discussing here are a benefit to the "working class".

I would be interested in your response.

Very truly yours,

Andrew H

BCD replies:

Andrew:

Thanks for reading the BlueCollarDollar. And thanks for writing.

The BlueCollarDollar is not as liberal as you make it sound. On the one issue of Social Security, I wanted to convey the idea that it is not and should not be a retirement plan. It was not intended as such when it was first created, and quite frankly, the idea of a "means test" to show need was once proposed during its formation (as was part of many states whose social security plans preceded that of the federal government) is not that bad of an idea. Social Security is just that. An incredible insurance program for spouses, disabled, and children, not to mention the millions of folks who would be impoverished, destitute, and otherwise a burden on society. It is when those that feel as though the program were another piece of their future comfort and want to divert the funds for their own enrichment that I tend to become quite passionate.

I will be the first to agree that we are taxed entirely too much. But sir, if you were to, God forbid, become permanently disabled, would what you have saved to this point to enable your spouse and children to survive, perhaps not as well, but well enough that they wouldn't be standing in line to find refuge in some shelter. If you have not received your statement (http://www.ssa.gov), you will shortly. Based on that statement, it does outline a payment that would be made to your spouse and your children. For your wife, this can be make or break money. For your kids, it is usually substantial enough to clothe, feed and educate them. Sorry. I believe in the program and the goals that it strives for.

The other point that I make albeit subtly, is that this market is not what it appears. Would you be able to withstand a market that yielded 0% return for twenty years running? It has happened. Could happen again. I've watched this stock market most of my adult life and I still am amazed at the folks who think they can beat the market. I would love to gamble, and I use that word intentionally, on my future with 2% of my contributions. But I would not want to give up one single benefit of that insurance to do so. For myself or my family. I invest aggressively and independent of Social Security and have done so for years. But it sure is nice knowing that the program is in place.

On another note, I also encourage everyone who reads the BCD to invest in their future by doing two things: Get out and stay out of debt, and that they never retire. The first one is a "no-brainer" but probably the most difficult thing a blue collar worker could do. The never retire part is much simpler. This is not your father's generation, and may never be for you, especially at thirty five. Living incredible stretches of time beyond retirement are going to be a reality for you and me. Outliving your money is a possibility. Outliving social security's ability to pay is also a real possibility. Working beyond 67 however, is also a real possibility.

The articles on the marriage penalty and the inheritance tax were merely an effort on my part to point out that all tax relief is not what it seems. The fact that a Republican House spearheaded those measures has nothing to do with it. I would like to leave the BCD out of politics, doing no more than encouraging everyone to vote. But I would like politics to stay out of Social Security. Some of the taxes that are being looked at are surpluses that should be used in a forward thinking manner rather than returning the cash in the form of a tax cut. This sixty year old program is still holding up well and will do so for the next 32 years without any help. Beyond that needs to be addressed, and it should be done with great care and with great regard to the principles that originally designed these types of programs in the early thirties.

Sure the government takes too much. They always have, and probably always will. But I like it here and for some reason, I don't mind paying. Be great if they evened the playing field somewhat and I hope some day they do. But lets not do it under the hollow guise that cutting taxes or releasing funds from Social Security for private investment is in the country's best interest.

I am on pace to pay about four thousand in Social Security tax this year. If you are paying $10k, you are probably doing quite well for yourself. Most of my readers would love to pay that much tax in exchange for your paycheck. I do hope that you are taking advantage of every break the government is giving you for your own retirement using IRAs to their fullest.

Once again, thanks for reading the BlueCollarDollar.

Paul Petillo
Editor, BlueCollarDollar.com

Andy replies:
Dear Paul:

Thanks for your prompt response. I think that we agree more than I thought. I have enjoyed reading the BCD and look forward to it each month.

We wholeheartedly agree on the subject of early debt retirement. My wife and I have only been doing well financially for about 3 years now. Before that I was making 35-40K working as a consultant for a small engineering firm. It was only by jumping out "on my own" and working 60-70 hours a week that I have "succeeded". We now are trying, with some success to live below our means so that we may pay off debt. In the last two years we have paid about 30% of our mortgage principle, and most of our car payments. We have no other debt and do not plan to incur any.

Best Regards,

Andy H

Debt
Is there such a thing as good debt? What do you suppose bad debt is? And what kind do you have?

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