A recent Social Security Administration report confirmed that, without any legislative changes, one of its two major trust funds will no longer be solvent in 2033.
And recently, personal finance author and radio host Dave Ramsey minced no words about his opinion on the state of the federal program.
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It’s important to note that lawmaker action to fix the solvency problem before 2033 is possible. Also, even without legislative intervention, exhausting the trust fund does not mean Social Security benefits will end.
In fact, ongoing funding from payroll taxes would still be expected to meet about 80% of benefits currently scheduled.
The subject came up when Ramsey was recently asked by an advice-seeker about a different government benefit.
“Dear Dave,” wrote a man identifying himself as Brandt in an email sent by Ramsey Solutions to TheStreet. “We’ve been following your plan for a while. We’re debt-free, except for our home, and we have six months of expenses set aside in our emergency fund. Recently, I lost my job. I’m luckier than some, because I received a generous severance package from my previous employer, plus my wife still has a good job.”
“My parents always raised me to take care of things myself and not rely on others,” he continued. “I suppose it’s because of this I feel a little guilty about filing for unemployment compensation. Do you think there’s anything morally wrong with accepting unemployment benefits?”
That’s when Ramsey explained his pointed views on Social Security before providing some perspective on Brandt’s compelling question about unemployment benefits.
Dave Ramsey calls Social Security a ‘mathematical failure’
Ramsey first replied to Brandt with a couple personal comments about the new reality in which he and his family find themselves.
“I really appreciate your self-sufficient attitude,” he wrote. “I don’t know what happened at your last job, but I’ve got a feeling you’re a hard worker and a decent guy. I’m sorry you and your wife are having to deal with this kind of situation.”
Then the personal finance personality bluntly asserted his take on the current state of Social Security.
“The Social Security system in this country is a mathematical failure,” he wrote. “But that doesn’t mean I’m not going to take my money when I deserve it. The government took it from me in the first place, so I don’t have a problem with accepting something I’ve already paid into.”
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Ramsey pivoted from that opinion on accepting one government benefit to Brandt’s question about unemployment compensation.
“Now, I’ll throw out a warning here,” Ramsey said. “Sometimes when people start receiving unemployment benefits, it causes them to take their foot off the gas. The idea that ‘free’ money is coming in can help them rationalize sitting at home on the couch, instead of working hard to find another job and being extra careful with their finances.”
“I’m not hearing that kind of mentality from you, though,” he continued. “And it’s obvious you and your wife have been pretty smart with your finances.”
An unemployed man is seen in front of a computer worrying about finding a job. Personal finance coach Dave Ramsey has advice for unemployed workers.
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Dave Ramsey suggests another personal finance strategy
The Ramsey Show host offered some advice about ways people can most effectively handle periods of unemployment.
“One more thing I’d suggest is making sure you look at your severance package as survival money only,” he wrote. “Make a strict budget and stick to it. Cut out all excess spending. That means no eating out, vacations or anything like that until you’re working again and everything’s back on solid ground.”
“Right now, focus on covering your Four Walls,” Ramsey added. “By that, I mean food, utilities, shelter and transportation. Feed your family, keep the electricity on, pay the mortgage and put enough gas in the car to get where you need to go.”
Related: Dave Ramsey has major warning on retirement, 401(k), Social Security
Ramsey finished with some words of encouragement.
“Everyone hits a rough stretch of road in life from time to time, Brandt,” he wrote. “But you two are in a position to handle it better than most. Just remember what got you to such a good place with your finances in the first place.”
“The discipline muscle is already there, and it’s strong. Just flex it, and it’ll help get you through this and back on your feet again!”
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