Generational ripoff

Posted: Apr 01, 2005 12:00 AM

I've got three teenagers, and like most parents, I dream that they will one day have families and children of their own. I dream that they will have great jobs that they love, be a vital part of their communities, and live moral lives marked by honor.
The dreams I have for my children are probably pretty much the same as the dreams you have for yours.

As part of our efforts to teach our kids to work and plan for their best futures, my husband and I expect them to work for their own spending money. Our sons do yard work for friends, wash cars, and engage in an assortment of other odd jobs for extra money. We teach them to save, to give from their hearts and pockets to our church and to those in need.
But I have a little dilemma. Somehow, I've got to tell my kids that they can expect to be ripped off of a substantial amount of the money they?ll earn.
Just as my oldest son, Drew, is reaching the age where he will take his first "real" job with a regular paycheck, I've got to break the news to him that he has a greedy ?uncle.? I'll have to explain that this sly guy has the authority to take money from him every single day. I also have to explain that I?m powerless to stop this uncle from taking more than 10 percent right off the top of everything my son earns for his entire working life.

This task is already tough, but it's even harder because Uncle insists that he's going to put the money into a vault, and when my kid is old enough to retire, Uncle's going to pay it back, with interest, so my son won't starve when he?s old.

But I know this is a lie. I know this uncle of ours is in serious debt. And I know he can?t repay all the millions he already owes everyone else. This greedy uncle's Ponzi scheme is falling apart, but he?s allowed to just keep on taking and taking and taking. And my son is about to become his next young victim.
This story is the ugly reality that is today's Social Security. With all the talk about Social Security these days, it's pretty difficult for the typical person, like me and you, to figure out what it really means for our kids. Most media stories are filled with so much gobbledy-gook about trust funds and benefits, etc. that folks? eyes glaze over, and they?d rather just change the subject.
Well, here's a simple way to find out right now exactly what the status quo will mean for your own children. Just take a few seconds, go to and visit The Heritage Foundation's Social Security calculator and you'll see what your child can expect to "earn" on all the money that crazy Sam will take from him.
I used the calculator for my son and discovered that, at best, he?ll receive a -1.57 percent return each month on the money that was taken from him. That's the reality, and it stinks.
But the problem is far worse for my godson, Michael, who?s 16 and black.
Because the average lifespan for a black male his age is around 64 years old, Michael can expect to be robbed blind by Uncle Sam. You see, if Michael enters the full-time workforce at say, age 22, and if he retires at age 67, he will have paid 10.6 percent of all his earnings to Uncle Sam for 43 years, but won?t collect a single penny. That doesn't just stink, it reeks of racism and stupidity. And remember, this is the best-case scenario for Michael under the current Social Security structure.
Michael and Drew should be able to own their retirements -- to take part of that 10 percent and invest it. They should be able to put it away and build a nest egg. And if they die before or shortly after they retire, they should be able to leave that nest egg to their families so their own kids will have a better future. Right now, whatever they don't live to collect is lost.
Social Security wasn't always a bad deal. It was a pretty hot ticket when it was born on August 14, 1935. Yep, it was a modern wonder, just like the 1935 Nash 400 automobile, featuring a luggage compartment, all-steel body and super-hydraulic brakes that sold for $675. Or the sleek Packard that sold for $980 to $1,095, depending on which special features you wanted. When Social Security came into its own in 1945, there were 42 workers paying in for every one person that entered retirement. Life was good.

But things change. The Nash and the Packard are relics, sweet only in the romanticized memories of those who knew them in their glory. So is Social Security. The robust 7 percent investment return that yesterday's retirees knew has dwindled to only 2.5 percent for those getting ready to retire today. And there are only three people paying into Social Security system for each retiree. In just 12 years, the system will start paying out more than it takes in.
We must work quickly to enhance Social Security by creating a system that is equitable, sustainable, and allows our kids to truly own their futures. Heritage Foundation Social Security experts have outlined the six basic principles that must be part of Social Security reform. For more information on what must be done, log onto Your kids are counting on you.