This comes under the heading of no baby boomer should talk to his teenager about social security.

I have one teenage son still living at home.  We were having an after dinner chat last night about politics and “the system.”  My rant was that none of the current batch of politicians is even talking about Social Security any more because it’s too embarrassing!

To illustrate the problem, I pulled out my latest statement from the Social Security Administration to show him. I was shocked! It turns out I have been working steadily every year for 45 years and I am still not eligible to retire!  Okay, where did all those years go? Getting over my angst, I proceeded to explain the form.

“Each year the government has taxed me on my earnings (How consistent of them). They set a cap on how much earnings are subject to SS tax. (It seems to me there was another ominous government outfit that went by the initials “S.S”. Hmmm…) You can see here how that cap grows every year. For most of my 45 working years I have earned more than the Social Security taxable income ceiling (except for the first few years when I actually worked for the government). See here? I have earned cumulative social security wages of about $2.7 million dollars.

My son began to perk up a bit. “Where’s the money, dad?”

“Squandered on living expenses, I am afraid. It’s too bad it costs money to live, otherwise we’d be rich.” His face fell, but I plowed ahead.

“Here it shows I have paid over $100,000 in Social Security taxes into the SS trust fund,” I continued.  (Something about trust and the SS didn’t quite sound right.)  “And that’s not counting another $100,000 paid by my various employers. In fact, for a good many of those years my “employer” was me. So I paid in double.”

“So, where did the $200,000 go?” asked honorable number one son, curiosity rising.

I explained:  “The SS “loaned” the money to the federal government until it needs it to pay me my benefits. Me and about 80 million other baby boomers.”

“So does the SS know the feds will actually pay them back in time to pay you your pension?”

“Ahh…that’s the sticky part. It seems our senators were a bit confused about that point themselves.  So they brought in their top economics guru — Chairman Greenspan — and asked him that question. You remember Greenspan – the inscrutable previous Fed chairman who coined terms like  “irrational exuberance” and “asset bubble.”  Greenspan was really good at naming bad things that were about to happen — like the “dot.com” bust of 2001, and the current sub-prime loan & housing fiasco. Greenspan knew a bad thing coming when he saw one.  That’s why they called him in.”

“And did Mr. Greenspan answer ‘No?” my son asked, idly thumbing the government textbook on his lap.

“Good guess but he actually answered ‘yes’, in a convoluted sort of way.  (He was really into convoluted-ness.)  His point (I think) was that so long as the feds can tax working people they can repay the SS loans so that the SS can pay the baby boomers their benefits.  That’s why it’s important that you get a job and become a working people.  The sooner, the better.”

“Somehow, you don’t make it sound very appetizing, Dad!  So, just how much benefits do you get, anyway?” asked my son.

“Well, the statement says something like $1600 per month, but there is this big caveat on our statements these days… something about ‘Congress has made changes to the law in the past and can do so at any time.’  And ‘Current projections show the SS can only pay for about 74% of the benefits it’s obligated to pay.’”

“Is $1600 a lot of money?” (This was the low point in the conversation for me. How can I have raised a son who doesn’t know what $1600 is worth?) (Come to think of it, maybe that’s a really good question: $1600 used to buy a car; now it buys 16 tanks of gas. Hmmm…)

“That depends on how you look at it,” says I. “If you add up all the money I have handed over to the SS, it’s around $100,000. If you add what various employers, including me, have handed over, that’s an additional $100,000. And if the SS was smart enough to invest the money over the years and earn just 3.5%, there should be about $312,000 in the pot earmarked for my retirement. And they are proposing to give me $1600 per month, assuming Congress doesn’t change its mind. That $1600 is the equivalent of earning 2% on “my” SS money for the remaining 20 years of my life. Does 2% sound like a good deal to you?”

“Well, dad, I got 4.5% on a small CD I just opened at the bank, so I guess the SS is a crummy deal. Can you take the money out of SS when you retire? You know, invest it yourself?”  Honorable son was thinking like an entrepreneur, now.  All is not lost!

“No, that’s one option they don’t give you.”

“Hmmm, well, dad, but what if you kicked the bucket early?  What happens to all that $312,000? Do sis and I get to inherit it?” (Did I detect a gleam of intent in his eye?)

“Nope, you are out of luck there, son. It goes away.”

“Goes away? What does that mean? Do you mean to tell me that the SS has taken $100,000 from you over the last 45 years, taken another $100,000 from your employers, and is now offering to pay you only 2% interest, plus they get to keep the principal if you die? What kind of a rip-off is that?”

“Well, it’s actually worse than that. If they only paid me 74% of the $1600, which is what they say they can afford, the interest rate would be negative – I would be paying them!”

“Who dreamed up this scheme, anyway?”

“FDR. Read about him in your government textbook. Some people — including grandma, who was alive back then — think he was a hero. Of course, Congress has had a lot to do with it since then, so you can’t really blame him.”

“Oh, so it’s Congress that’s running the SS?”

“Yeah, pretty much. President Bush tried to get everybody to talk about fixing the problem a couple of years ago, but the issue was so embarrassing, the current batch of politicians have stopped talking about it. They would rather talk about giving more money away in the form of free health care for everybody.”

Well, at least when they figure out what’s happening to their retirement money Congress will fix the system, won’t they, dad?”

“Actually, what Congress has done is exempt themselves (and about nine million federal employees, to make it seem not quite so obvious) from participating in the SS fund. They have a separate plan that’s much better and on a sound financial footing.”

“You’re kidding!”

“Nope!  Dead serious.”

“So what are we supposed to do? Just troop off to work to pay more taxes so you 80 million boomers can retire and get a minus 2% interest return?”

“Well, actually, running for Congress makes a lot of sense.”

“You mean so I can change the system?”

“No, that will be really hard.  I was thinking more along the lines of you joining their retirement plan. And their health care plan of course.”

“Dad?”

“Yes, son…”

“What does it cost to emigrate to Norway?”

“Right idea, wrong destination,” I said.  “We might be better off if we took a fresh look at what we mean when we pray, ‘Your kingdom come, your will be done on earth as it is in heaven.’”

His eyes narrowed just a bit and I said, “Read your book; we’ll tackle that tomorrow night.”