Social Security: Freedom To Make Bad Retirement Choices?

If everyone gets to invest their Social Security contributions as they see fit, what do we owe the participants in the system with bad investment judgment or bad luck?

I watched the Sunday news programs where the spokeswoman for the conservative view argued for taking the care and custody of Social Security contributions away from the government and giving it to each participant in the system.

Setting aside the fact that Social Security does not operate to return to each of us our contributions plus the growth of those contributions, but rather assures us of a floor under our old age budget based on our work history, I wondered how such an approach would deal with those whose investment choices didn?t work out.

Bad retirement choices abound in my bankruptcy clientele.? I see people who have drained their IRA?s and 401(k)?s to prop up a failing business or hang on to a home with a bad loan. Last week, a retired couple was dipping into their retirement nest egg to stay current on the mortgage on a commercial building? whose tenants weren?t paying while they tried to sell the property.? They were making investment choices for their retirement funds.

While the things that my clients are trying to do with their retirement funds are positive, they may not be wise.? At least, they may not be a wise use of money that is supposed to cover the gap between Social Security and the real cost of living retired.

Too often, the only savings that families have are the retirement accounts;? any financial crisis or ?opportunity? calls out for the premature withdrawal of those funds.? Once withdrawn, the retirement account is effectively gone. While one can borrow from a 401(k) and repay the loan, take money out of an IRA and there is no provision for returning a lump sum.? You are stuck with the annual limits on contributions.

My experience tells me that not every wage earner is a nascent Warren Buffet, eager and capable of making good choices about how to manage the underpinnings of their retirement.? Further, I am not prepared to doom the foolish or the unfortunate to living in utter poverty as the result of poorly managing their Social Security.? It?s hard enough to watch when they fritter away the retirement? money they currently control.

Image courtesy of morberg.

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Source: http://moneyhealthcentral.com/ready-to-stake-your-retirement-on-the-stock-market/

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