If you’re currently relying on the Social Security Administration to pay for your retirement, you might want to rethink that decision. Why? Because the trust fund reserves for Social Security are, if no changes are made, going to be exhausted by 2037.
At that point, the continuing taxes going into the program would only make up 76% of the scheduled payments. Congress would then have to either take out yet more debt to pay for entitlement benefits today, which would be fiscally irresponsible even for Congress and potentially lead to more inflation (something that they would have much more trouble doing under the gold standard), would have to raise taxes on the young to pay for the retirement benefits of the old, which would be political suicide, or cut benefits to retirees, which would also be political suicide.
Admitting the situation is the Social Security Administration itself, which admitted in an article that:
“As a result of changes to Social Security enacted in 1983, benefits are now expected to be payable in full on a timely basis until 2037, when the trust fund reserves are projected to become exhausted.1 At the point where the reserves are used up, continuing taxes are expected to be enough to pay 76 percent of scheduled benefits. Thus, the Congress will need to make changes to the scheduled benefits and revenue sources for the program in the future.
“Since the inception of the Social Security program in 1935, scheduled benefits have always been paid on a timely basis through a series of modifications in the law that will continue. Social Security provides a basic level of monthly income to workers and their families after the workers have reached old age, become disabled, or died. The program now provides benefits to over 50 million people and is financed with the payroll taxes from over 150 million workers and their employers. Further modifications of the program are a certainty as the Congress continues to evolve and shape this program, reflecting the desires of each new generation.”
The SSA did provide a way out (though it’s now out of date, as the article was written in 2010), saying “The Social Security Board of Trustees project that changes equivalent to an immediate reduction in benefits of about 13 percent, or an immediate increase in the combined payroll tax rate from 12.4 percent to 14.4 percent, or some combination of these changes, would be sufficient to allow full payment of the scheduled benefits for the next 75 years.”
But will Congress cut benefits or raise taxes? Doubtful, given how much people would freak out about both.
Hence the need to protect your wealth and retirement now: invest. Whether you invest in equities in the hope of growth, buy bongs or real estate to develop an income in retirement that’s not dependent on the solvency of the Social Security program, or start buying up gold so that you can preserve your wealth as inflation wreaks havoc, you need to do something to preserve your wealth and safeguard your well-being as a feckless Congress runs out the clock on Social Security.
Explaining why those worried about future financial instability might want to consider gold as a way to safeguard their wealth, Investopedia noted that “Throughout the centuries, people have continued to hold gold for various reasons. Societies, and now economies, have placed value on gold, thus perpetuating its worth. It is the metal we fall back on when other forms of currency don’t work, which means it always has some value as insurance against tough times.”
Continuing, the same Investopedia article on why gold can be a good investment notes that:
Weakness of the U.S. Dollar
Although the U.S. dollar is one of the world’s most important reserve currencies, when the value of the dollar falls against other currencies—as it did from 1998 to 2008—this often prompts people to flock to the security of gold, which raises gold prices. The price of gold nearly tripled from 1998 to 2008, reaching the $1,000-an-ounce milestone in early 2008 and nearly doubling from 2008 to 2012, rising above the $2,000 mark. The decline in the U.S. dollar then occurred for a number of reasons, including the country’s large budget and trade deficits and a large increase in the money supply.
Inflation Hedge
Gold has historically been an excellent hedge against inflation, because its price tends to rise when the cost of living increases. Over the past 50 years, investors have seen gold prices soar and the stock market plunge during high-inflation years. This is because when fiat currency loses its purchasing power to inflation, gold tends to be priced in those currency units and thus tends to rise along with everything else. Moreover, gold is seen as a good store of value, so people may be encouraged to buy gold when they believe that their local currency is losing value.
What will happen if the government prints money to pay for Social Security? Inflation and a weak dollar. And if it raises taxes or cuts benefits? Political instability and a likely weak dollar. So, if you’re worried about those outcomes, gold might not be a bad decision.
Obviously, other forms of wealth growth and preservation are important too, namely equities and real estate.
But gold has been with us in the West as the ideal form of money since the Greeks, if not earlier. It’s held its value, being worth now about what it was worth during the times of Diocletian (a Roman emperor for whose reign we have much economic data), and, unlike stocks, can be held physically, meaning that the government can’t freeze your gold stash if you’re a dissident like the Canadian government froze the bank accounts of those in the trucker protest.
So, with Social Security running out and the problems that might bring, particularly inflation and political (and thus monetary) instability, consider holding your wealth in the metal that’s been money for as long as the West has been great.
NOTE: This is not financial advice. This is an opinion piece. Treat it as such.
"*" indicates required fields