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Happy 80th Social Security

8/18/2015
By Charles V. Payne, CEO and Principle Analyst

Eighty years ago on August 14, 1935, Franklin D. Roosevelt signed into law Social Security along with other social reforms such as Federal Deposit Insurance to help protect bank accounts.

It’s a little worse from wear and tear considering the fact that it was never supposed to be used. While FDR might be somewhere blowing out 80 candles, the scheme was the brainchild of Otto von Bismarck, Chancellor of Germany from 1862 to 1890.

In an attempt to push back on the rising tide of socialism in Europe, the Chancellor came upon the idea to adopt a social safety net that would never be used. By putting the government in control of the aging retired people who would spend and eschew savings.

Moreover, people would grant deeper access into their own paychecks.

Here’s the deal, it was not designed to work.

Although Bismarck was 74 when the plan was implemented, he was 65 when he came up with the idea and 66 when he first gave a famous speech declaring, if some thought it to be socialism, then so be it.

The initial retirement age was 70. It was then lowered to 65 in 1916.

Fast forward to FDR’s largess of government goodies; this was perfect. Again, knowing actuarial tables, FDR’s team understood that promises were rarely kept and that Americans did not live long enough back in 1935.

The lifespan in 1935:

  • Male 59.9 years
  • Female 63.9 years

Now, the scheme is broken with the disability part going bankrupt next year. The big program will run dry by 2034, where it will only have cash to pay 79% of the promises. If you are under the age of 40, and you do not have a backup plan, shame on you.

Charles Payne
Wall Street Strategies


 

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