Will Social Security Be Rescued By a Enforced Retirement Plan?

As our leaders on Capital Hill battle it out over how to decrease spending in efforts to contain this mountainous atrocity we refer to as "The Deficit", the conflict between revenue, taxation, and spending will eventually arrive at the door of the Social Security Administration. It has been well established that the system may be headed for doomsday without drastic reform, and with this in mind, a number of proposed solutions are likely to emerge.

One such plan is derived from a model used by other countries: a mandatory retirement savings plan. The program, if instituted, would be designed to relieve mounting pressure on the Social Security reserves. Considered an extreme measure by some, advocates of the measure argue that this forced savings would provide for increased financial security in old age. Although implementation of this proposal will present some difficulties, with the financial future of many retirees currently unclear, the plan may merit some significance.

The basic premise of the plan would require all workers to set aside 3-10% of their wages into a portfolio that is highly diversified with minimum management fees. The savings would be collected via a payroll deduction and put into a managed fund. Some suggest a fully managed portfolio administered by a government agency while others favor allowing the worker more control over the investment options. The general goal of the program is to provide the retiree a means of supplementing their Social Security thereby reducing the burden on the system as a whole. However, should the Social Security system collapse as some do predict, the obligatory savings plan will lessen the blow to our nation's growing population of individuals over the age of 65.

Dating back to the 1700's, our country does not respond well to anything that is forced upon them, good or bad. However, while American's tend to be resistant to anything deemed to be "mandatory", one can not argue that the current voluntary based retirement programs are not getting the needed results. Simply put, employees are doing a poor job of planning and preparing for their retirement needs. According to 2009 statistics from the Employee Benefits Research Institute, only 59 percent of workers had access to employer based pension or retirement programs and only 45 percent were truly participating in them. A forced plan would go further towards the assurance of financial security at retirement. While it is true that mandated answers are not always the best solutions, one must keep in mind that this program would not be a tax, but rather a savings plan.

Whether you support or oppose this model is not as imperative as the realization that appropriate financial planning is critical for you and your family. As a society, this realization has become sobering to say the least. The skyrocketing cost of living and the rapid escalation in the cost of healthcare demands planning and consideration. Getting sound advice from a seasoned financial advisor makes sense at any age. Active portfolio management from an expert professional can place you into a position to take pleasure in your retirement years, rather than fear them.


Learn more about active portfolio management and its benefits by contacting John Dubots, Temecula financial advisor, with Dubots Capital Management. Dubots has over two decades in the industry and will provide a free consultation to answer all of your portfolio management questions.