Tax Guru-Ker$tetter Letter
Saturday, July 13, 2002
Fear Mongers Are Out
Every time the stock market has problems, the fans of big government use that as an argument against any attempt to change the Social Security system. Their arguments are wrong on several levels; but I only have time to cover a few here.
First is the assumption that any money diverted from SS would automatically be invested in the kinds of speculative stocks that have suffered. I'm sure some idiots would do that and they would deserve any loss from such a stupid move. Most people would invest the money more wisely. A savings account would still be preferable to the SS Ponzi Scheme. While it may not make a spectacular return, it will still be real money that can be left to heirs; something that is not possible with the IOUs in the imaginary nonexistent SS trust fund.
These assume that money is deposited in actual retirement accounts. While that may be Bush's plan for changing the program, that isn't the most effective way. In fact, it's not even necessary to wait for our rulers to make any changes. The opportunity has already been available for decades.
For example, I was speaking with some new clients a few days ago on how setting up a new C corporation would enable them to very easily reduce their personal SS taxes by anywhere from $10,000 to $15,000 per year. They are in their late 40s, early 50s. Over the next 20+ years, the amount of money they will not have flushed down the SS toilet will amount to a huge sum. We won't waste time crying over the hundreds of thousands they already flushed away.
I wouldn't expect them to put that money into an actual account anywhere. Instead, they will invest it into their business or possibly buy some real estate. When time comes to retire, I can guarantee that they will be many times better off than if they had sent that $10,000 to $15,000 per year to DC. Contrary to Socialist Missouri Congressman Dick Gephardt's advice from his imaginary billionaire friend to invest in SS, I would trust just about anybody to do a better job controlling their own money than our rulers in DC would. As the messiah of big government, Bill Clinton, said in a speech about possible tax cuts, "the people are just too stupid to know how to spend their money." Only he and his fellow travelers know how to spend it wisely.
A big misconception I often hear is when people moan about not having a retirement account. They envision being destitute in their later years if they don't have an actual bank account sitting there waiting for them. This isn't true. All assets a person has are essentially their "retirement account." They can sell them off or borrow against them and use that money.
Real estate is still the best long term reliable investment I have ever seen. I have seen so many people do quite well for themselves by buying a rental property each year until about the time they reach 60 or 65. They then sell a property each year and carry back the paper. The cash flow they receive each month makes Social Security benefits look anemic in comparison. And as I have said countless times, the properties and the notes that are left behind when they pass away are real assets that can be passed on.