Entitlements

By Joe Rector

I listened as Speaker Paul Ryan talked about his tenure as a U.S. representative He regretted that he’d not been able to tackle the problems with “entitlements.” The more politicians talk about entitlements, the more my hackles react. Yes, that means I am growing angrier about the rhetoric that the folks in Washington spew.

According to Merriam-Webster Dictionary, entitlement is defined as “a right to benefits specified especially by law or contract.” Most often, they are identified as Medicare and Social Security. The fact is that all of us have been paying FICA (Federal Insurance Contribution Act) taxes from each and every paycheck we’ve received over the years. These two things are considered entitlements, but they shouldn’t be viewed in negative ways.

A bit of research provides some interesting data. The average employee pays 7.65% of his or her paycheck into FICA. Employers pay another 7.65%. So, that equals a hefty 15.3% is going to Social Security and Medicare. If we calculate the average salary for an individual is $35,000 over his work life and that he works from ages 18-65 ( total of 47 years), then the total contribution to the system is $5250 a year and $246,750 over that 47-year period. The average employee in this country has contributed one quarter of a million dollars toward retirement and Medicare.

If the money were invested in typical financial planning products with a return rate of 10.3% (the average since 1970), the total contribution per individual would equal $4,516,150. That is what the government would have for the average person when he or she reaches the age of 65. I’m confident that most of us could survive on that amount over the golden years of our lives.  Now, many of us don’t count on entitlements for our sole income. We’ve scrimped and saved to put away and invest just a little each month. If over our work life we have managed to average $100 a month, then we’ve amassed another $1,031,083 at 10.3% return. (http://www.bankrate.com)

No senior citizen wants to feel the sting of congressional comments that “entitlements are killing our country and will lead to its ruin.” Better management of collected funds could have and still can lead to better returns on investments of FICA taxes. Don’t say payments to citizens are entitlements in a negative way. As I understand it, the money that the government pays out is what we paid in. It is not citizens’ faults that our government has been such a poor steward of the money we entrusted to it. Yes, life expectancy has increased, and perhaps a rise in the FICA taxes are necessary to cover the shortfall that is occurring because the government hasn’t handle the money in our best interests.

A word of advice to those younger folks who don’t believe they will ever see a dime from Social Security payments. Take some amount of your income right this minute and invest it. Each time you receive a raise, put a percentage of it with the monthly investment. Make sure you are getting the best rate of return on your money and DON’T touch that money unless a catastrophe befalls you.

Elected leaders, stop whining, complaining, and belittling and start making better decisions for everyone and the country. The funds we send for FICA should be more wisely used so that Social Security and Medicare can remain solvent for future generations.

 

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