No gold at the end of Social Security rainbow

You can be right or you can be ready. I am talking about those still in denial about the current condition of the Social Security trust funds. Fighting about this issue rages on, but no matter what you believe, is it better to be correct or prepared just in case you are not?

Both sides can cite sources claiming there are indeed real assets in these trust funds or that Social Security is broke. As a former financial planner, I felt it was important that I thoroughly understood entitlement programs since they played such an important role in retirement planning. Knowing that current benefits are paid from taxes paid by those who are employed, means simply that Social Security is a "pay as you go" program. As long as you have more working than collecting benefits, things work fine.

CBO estimates are based on projected ratios of those employed to those retired, but the CBO never figured in the massive recession that started back in 2008. Many more are currently unemployed than projected with many jobs permanently lost, but the rate of Baby Boomers retiring remains the same for the most part. This will create deficits much sooner than government bean counters ever thought and will start adding to our massive national debt.

Over the past 15 years, I have addressed the looming problems in entitlements many times. Even without the current recession, the writing was on the wall as Baby Boomers did not reproduce at the same rate, but rather created a zero population growth generation to replace themselves.

In the face of fierce criticism, even AARP recently appeared to be softening their stance on reforms to Social Security. AARP policy chief John Rother recently told the Wall Street Journal that the organization was changing its long-held stance to benefit cuts by saying "the ship was sailing" indicating changes were inevitable. Admitting that no one has the silver bullet on Social Security, AARP is not saying anything new. All along the organization has recognized the need for open dialogue concerning how to keep the program solvent, both from the revenue and benefits side.

There was no mention of a big pot of money there to solve these problems. Currently the discussion is not about how to dole out all those treasury bonds in the trust funds, but on raising payroll caps and retirement ages, including everyone in the system (like state workers, teachers, law enforcement and firemen) and, dare I say, private retirement accounts. Back in 2005, AARP was adamantly opposed to the Bush plan of partial privatization but, personally, I sure would have preferred having that money in my IRA rather thanthe government mismanaging it.

What I am trying to tell all of you is that it really does not matter whether you believe that Social Security is solvent or not. It is better to be safe than sorry here. In this area, you must ask yourself if you have adequate assets in IRAs pensions or annuities to live comfortably in retirement for many years without reliance on promised Social Security benefits. My concern for citizens is that they will be caught totally unprepared for changes in both Social Security and Medicare; changes that are becoming more obvious as deficits continue to balloon out of control.

Without your projected SS benefits and the current premium structure of Medicare, have you saved enough, adjusted for inflation and longevity to be able to say you will have enough in retirement assets no matter what happens?

Personally and professionally, if I were doing your financial planning, I could not in good conscience allow you to believe there is a pot of gold at the end of the entitlement rainbow. No matter how you feel about Social Security, please be prepared rather than potentially sorry. It is just common sense. If that means that you to save more and spend less while working or retire later than you had planned, that is better than running out of retirement funds in your 80s or 90s, well past your ability to return to work. I think we can all agree on that one.

• Carol Perry has been a Northern Nevada resident since 1983. You can reach her at Carol_Perry@att.net.