Social Security just celebrated its 80th birthday. Did you get one of the last pieces of cake? Guess what? According to the government, the last piece will be served sometime in 2034. And this makes another 2015 birthday more meaningful. In October 2015, we’ll celebrate 30 years of Marty McFly and that whole Back to the Future craze. In a weird way, the second part of this famous Michael J. Fox trilogy tells us all we need to know about Social Security and the millennials.
In that first sequel, Marty and Doc Brown went to the future and then to the past. But not before the older Biff snuck back to 1955 and gave his younger self a sports almanac that contained all the winning teams through 2015. Armed with this future insight, the young Biff scores big on the gambling circuit and changes the world.
Imagine if those 20-somethings (i.e., the younger baby boomers) in 1983 had held the same steadfastness that today’s millennials do. They’d probably not be as rich as Biff, but the world today would be a changed placed — and probably for the better.
But more on that in a second. Let’s return to the thoughts and feelings about the millennial generation as it pertains to their future retirement and Social Security. We now know the fabled government-run defined benefit program will run out of money in 2034, a year short of its 100th birthday. But, we always knew that, didn’t we? Some say the politicians will save it, and some say, to save it, politicians have no choice but to destroy it. Given this uncertainty, determining the best way to incorporate Social Security into an individual’s retirement plan remains an art, at best, with the paint mixture changing depending on one’s generation. (To see how this interplay between accounting and politics might work, read “How Should a Fiduciary Treat Social Security in Retirement Planning – A Generational Overview,” FiduciaryNews.com, August 25, 2015.)
Rather than sit back and play the passive victim to some future sequence of elections, millennials have come to the same conclusion all younger generations eventually come to: “Screw this, I’m doing it myself.”
A recent survey indicates 64 percent of millennials feel Social Security won’t be around by the time they retire (for those of you counting, the millennials will start retiring around the year 2060). Sure, there may be a program labelled “Social Security” in existence then, but no millennial in their right mind assumes it will be the same as their father’s (let alone their grandfather’s) Social Security. The bottom-line for millennials is, when it comes to planning their own retirement, they just can’t count on Social Security. As a result, they’ve added together their realization that neither the government nor somebody else’s business will look out for their own best interests; thus, they’ve accepted they are the best ones to watch out for themselves.
Such an independent streak! It reminds me of their 1980s counterparts. That was the decade when rugged individualism and self-reliance ruled. It was a time when young whipper-snappers shrugged off any dependency on corporate pension plans and embraced the self-reliance afforded by the opportunity of the 401(k). It was an era that spurred entrepreneurialism and, though at times short-lived, brought riches to many willing to take a chance on themselves and their own ideas. Many of these riches ended up in 401(k) accounts and IRAs, producing, all across the nation, what have become today’s retirement plan millionaires. Incidentally, and perhaps food for thought, this grand capitalist experiment defeated a totalitarian regime without firing a single shot and spawned one of the greatest periods of economic prosperity our nation has ever seen.
But that older generation failed miserably at the one golden opportunity it had. In 1983, with Social Security on the cusp, political leaders agreed on a patchwork — not a solution. As a result, instead of forever ridding our nation of this Ponzi scheme, it shackled one more generation — the baby boomers — to its forbidden fruit. Today, what modern day “Biff” wouldn’t want to go back to the 1980s and tell his younger self to spurn Social Security and put all that payroll tax money into a private 401(k) account? In a sense, the politicians of the 1980s pushed the problem down the road for some future generation to deal with.
That future generation may just be the millennials. They’re on the right track. Do they have the guts, the confidence, and the fortitude to force their elders to make the right decision?
Ask me in 30 years.