Monday, January 26, 1998
Pair of
Bulls?
By Dave Sonntag
([email protected])
I was helping my mom figure out how much Social Security she will eke out of the "widow’s mite" she has accrued over her short working lifetime. While I was at it, I calculated a 1.0% return that I will – or, less optimistically, might see from a lifetime of FICA withholdings. If that same lump sum of withholdings were to accrue at a conservative inflation-adjusted rate of 8 percent, instead of a paltry $289,000, my retirement fund would be worth $2.5 million! My calculated return as a Thirtysomething on the cusp of the baby-boom jives with a recent Heritage Foundation report on the sad state of Social Security. As of 2012, the Social Security trust fund will start to lose money, and will be totally broke within a few years. Some estimates are less optimistic about the fund surviving that long.
Being a Fool, financial numbers are great, but the emotional response to such a waste of talent merits a Fribble. In particular, I’m keen on parables as Fribbles. And no, this isn’t a Fribble about a two-year bull market. The word "parable" comes from the Greek, and means "a setting side-by side, or a comparison." In a parable, Foolish principles are presented by comparison with material things. Oriental teachers in particular have been fond of parables. Foolish parables abound in the Bible, including: "The Hidden Treasure," "The Pearl of Great Price," "The Two Debtors," "The Rich Fool," "The Lost Piece of Silver," and "The Ten Pieces of Money." The latter, also known as "The Talents," (Matt 25:15-30) was the parable that came to mind as I pondered my squandered future.
The parable of the talents is about stewardship and accountability. In the biblical parable, "talent" refers to a monetary unit. But we can liken this parable to ourselves if we consider the Foolish use of our own talents and abilities. In this story, three servants were entrusted with stewardship over a certain amount of "talents," each according to his abilities. Upon their master’s return, an accounting was made. The first two servants were Foolish with their stewardships, while the third Wisely stuffed his in the sand.
Of course, the two Foolish servants doubled their talents, while the Wise servant "preserved his principal." Guess which of the three the master commanded to be thrust into outer darkness, amidst weeping and gnashing of teeth? The Wise servant was selfishly thinking only about himself -- playing it safe, and protecting himself from any risk at all.
So what is a talented Fool to do about Social Security? The first thing is to make the problem personal. You can estimate your lifetime’s FICA withholdings and the return on that capital with several online calculators, including the one at http://www.townhall.com/atr.
Strangely, the most Foolish option for Social Security comes from the South American country of Chile, which has offered its own Necios a private Social Security investment option since 1981. At that time, their system looked a lot like our own, with payroll taxes exceeding 26%. Today, their system provides workers with retirement benefits as high as 70% of their final salary. That compares to about 42% for our own moribund fund.
Boomer Fools in particular need a private option for Social Security, as they are the ones that typically see the lowest returns on their FICA withholdings. In fact, the Heritage Foundation report made clear that some younger minority employees will actually see a negative rate of return on the FICA taxes they pay.
Our time, talents, and abilities aren’t our own. We are part of a bigger picture that encompasses our families and larger communities. Fools know that. They provide for their own, and then give freely of their substance to those less fortunate than themselves. Fools also don’t commit their financial futures blindly into the hands of the Wise. It’s time to thrust our Wise servants into outer darkness, and let us be unselfish with our Talents.
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