The elderly are spending your inheritance; Social Security is busted

Wake up young workers of America! Our future is being mortgaged to grease the gears of government.

Things are fine now, the economy is churning and everyone is smiling. But watch out for the dark clouds gathering at the corners of the horizon – we face a devastating storm that could wash our future away.

If we don't make our voices heard soon, we may be strapped with a financial drain that we could have avoided, if only we had been paying attention.

A quick read of the newspaper lets us know that we are living in unprecedented economic good times. This month, we enter the 110th straight month of growth. The federal budget is awash with surpluses that are projected to go on as far as the eye can see.

You would think that the economic euphoria and the rivers of cash flowing into the coffers in Washington would encourage our leaders to address the imminent financial crisis lurking just over the horizon. But, we're still waiting. As you read this, Social Security and Medicare are being swept toward bankruptcy – that's no secret. Social Security's trust fund will begin running a deficit in 2015 and will run dry by 2037.

If that's too far away, then consider that Medicare is already running a deficit, and will be out of money by 2025. That's a little bit closer. So, what does this mean for the baby boomers and younger generations? The payroll taxes we pay for Social Security – 6.2 percent from our income and 6.2 percent from our employer for a total of 12.4 percent – is coupled with the trust fund finances to pay retiree benefits each month.

Once the trust funds run out of money, however, the only money the government will have to finance Social Security and Medicare will come from our taxes.

Currently, there are about 3.4 of us working for every person receiving retirement benefits. By Social Security Bankruptcy Day in 2039, there will only be about two workers for each retiree. And no trust fund money.

Do the math and you will see that, for instance, you and your co-worker in the cubicle next to you will have to pay the full retirement benefits for a retired person, if current benefits are maintained. We will face a payroll tax rate of about 18.6 percent – 9.3 percent from our paycheck and 9.3 percent from our employer. That's a 49.8 percent tax increase from the current level, and that is before we pay for Medicare, pay income tax, buy a house or save for our own retirement.

Of course, we could also make up the shortfall by cutting retiree benefits. There is a perception that Americans have a "guaranteed" Social Security benefit upon retirement.

However, the Supreme Court has ruled that there is no guaranteed benefit, even if an individual has paid into the system his or her entire working life. Thus, Congress is free to cut benefits at any time. There's no security in that.

I am not advocating generational warfare or mandatory euthanasia for the elderly. We have made a commitment to our parents and grandparents that they would receive a certain benefit and we should honor that.

I propose a solution that will save the current system and give us control over our retirement savings, without reducing the benefits that current retirees and near retirees receive. Allowing individuals to invest 2 percent to 4 percent of their 12.4 percent Social Security payroll tax in a personal savings account will give workers a better return on their investment than under the current system. Better yet, it will give workers a guaranteed benefit when they retire.

Under a number of Social Security reform proposals, workers would invest their money in one of a number of private fund management firms with government-approved and regulated plans. Most plans couple this with a government guarantee that no one will do worse under the new system than under the current system. Thus, even the poorest workers with no investment experience will fare as well or better than under the current system. The current system is lumbering toward insolvency, and our leaders are out to lunch.

Every day that Congress does nothing is another day of program solvency that is lost. We must encourage them to act quickly, while the money is available, while we have the political momentum and public support for reform.

If we fail to prepare during this calm before the storm, our generation will be deluged with debt when the financial trough runs dry. As we slowly drown, we can look to the sky and wonder why we did nothing when we had the chance.