Dear Mr. Berko: Several weeks ago, your email advice to our 32-year-old college-educated son about Social Security was distressing and frightening, and went overboard with negativity. It illustrated your lack of faith in the American system. A member of Congress who is a friend we’ve known for 17 years says you’re “wrongheaded and an alarmist.” He said your “sky-is-falling” half-truths sell your books and earn well-paid guest spots on TV and radio talk shows. Mr. Berko, when an inexperienced, impressionably young professional such as our boy writes for advice about his family’s future and retirement, please understand that he is very likely to take you literally. Your advice to him was unnecessarily alarming.
— SR, Detroit
Dear SR: Congressmen can’t afford to have friends, so they have supporters. And when they leave Congress, some of those supporters become friends. I don’t know of a retired member of Congress who isn’t a multimillionaire. That’s the American system in which I lack faith. Meanwhile, I’ve never written a book for publication, and I don’t do TV or radio talk shows. And I’m disappointed that you and many other parents lack the courage to tell their children the truth.
Yes, I told your son that paying Social Security taxes is like pouring his retirement hopes and dreams into a huge government-run cesspool. Fortunately, your son has job skills that are portable and will always be in high demand. I told your son to “work like a beaver and save like a miser and invest like a wise man, because congressmen will be too busy supporting themselves and those who can’t, won’t and don’t.” Social Security and Medicare have morphed into a flailing financial slop house with rotting beams, cracked walls and a fractured foundation. It’s been suborned by Congress, perverted by lawyers and so abused by millions of unintended beneficiaries that its unfunded liabilities in today’s dollars exceed $100 trillion. Social Security and Medicare are so close to insolvency that eliminating the earnings cap and enormously increasing the tax rate might have no impact on its survival for your son. Over the years, Congress, to secure votes and favors, has made too many promises to too many people with your money. If I’m wrong, there’s no harm done, and your son retires rich as a rajah. If I’m right, his family will bless his wisdom.
Make retirement payments
Your son and his wife earn $147,000 a year. They participate in a 401(k) plan that’s worth a pig in a poke, which is about what most of today’s stinky 401(k) plans are worth. I advised your son to take charge of his financial life and not to take counsel with a broker who has incentive to peddle some of the highest-commission products he can find. I gave your son a list of 10 good no-load mutual funds from Fidelity and T. Rowe Price. I told him to invest at least $1,500 a month and divide that money evenly among certain funds every month for the next 35 years.
