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Dear Daily Reckoning Reader,
I’d like to expand on a theme we covered a few weeks back... as it could have a serious impact on your retirement.
Now, you probably already realize that Social Security is headed for bankruptcy.
What you might not know is that it could happen much sooner than we anticipated.
A study out of Harvard and Dartmouth claims the Social Security Administration has been underestimating the costs of the safety net by at least $1 trillion since 2000.
Whoops!
Now the trust fund is projected to be bone-dry by 2031.
Needless to say, this could pose a major problem for the estimated 70 million baby boomers that have either recently retired or are planning to retire in the near future.
So here’s the big question...
What happened to all of that money?
What happened to the trillions of dollars that Americans collectively contributed to the system over the years?
Well, according to The Washington Post, “The Social Security system has no trust fund. No lockbox. When you pay your payroll tax every year, the money is not converted into gold bars and shipped to some desert island, ready for retrieval when you turn 65.”
Instead, it “gets entirely spent. It vanishes. In return, a piece of paper gets deposited in a vault in West Virginia saying that the left hand of the government owes money to the right hand of the government.”
Now, you may be wondering what gives the U.S. government the right to foolishly squander away your retirement money?
The answer: Once the money is deducted from your paycheck, it’s not yours anymore... and the government is under no obligation to give it back.
In an article titled “The Ugly Truth About Social Security Is Revealed,” Forbes reported that “The money we pay into Social Security is not ours... meaning politicians can reduce or confiscate the dollars withheld from our paychecks as they see fit.”
They also pointed out that “we know this now not because we’re logical, or because some libertarian said so, but because Jim Horney at the liberal Center on Budget Priorities told us exactly that.”
In other words, the retirement money you were counting on to be there is at the mercy of the federal government.
This is precisely the reason that the Canadians reformed their own national “old age” retirement plan back in 1997. (You can click here for a detailed synopsis of the changes that took place.)
After realizing that the Canada Pension Plan (or “Canadian Social Security,” as we like to call it) was on the brink of bankruptcy, they decided that the only way to make the system flourish was to remove the Canadian government from the equation.
And it worked...
![]() As a result, cash reserves for the Canada Pension Plan started with $36 billion... and by 2004, reserves had more than doubled, to $77 billion.
That number has since grown to over $219 billion... a six fold increase from where they started.
And it’s estimated that total cash reserves for the Canada Pension Plan are set to hit over $800 billion by the year 2040.
[Ed. note: You can learn more about the Canada Pension Plan by clicking this link.]
It’s not hard to figure out why Canadian seniors seniors now enjoy one of the lowest rates of poverty in the entire world.
But here’s where the story takes an interesting turn...
Right now, a growing number of American citizens have discovered a “loophole” in the Canada Pension Plan that allows them to piggyback the system... and collect monthly “benefit” checks between $400-4,700 per month.
After spending the better part of six months investigating the situation, our senior income specialist has concluded that dozens (possibly hundreds) of real Americans just like you are pulling down this income month after month.
For example, Sara Yaeger, a secretary from Texas, now manages to piggyback the Canadian version of Social Security... and collects $2,900 per month in “benefits.”
The same goes for Carol Alderman, a widow with two children -- who averages more than $1,200 in “benefits.”
According to this eye-opening expose, it’s perfectly legal to do...
And what’s more, anyone who knows about this “loophole” can do the exact same thing... regardless of age, income and job status.
In fact, you don’t have to live or work in or even travel to Canada in order to receive these “benefits.”
If you’d like to view the full story, you can do so by clicking here.
After seeing it myself, I’m beginning to wonder what’s stopping us from following the Canadians’ lead... and completely removing the greedy hand of the U.S. government from our own system.
Cheers,
Peter Coyne
Managing editor, The Daily Reckoning
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