Most of you probably have heard the unfortunate story of Bernie Madoff.
He’s the former Nasdaq Stock Market chairman and founder of Bernard L. Madoff Investment Securities LLC, who was recently arrested and charged with securities fraud in what federal prosecutors called a “Ponzi scheme” of enormous proportions… involving losses of more than $50 billion.
Bernie “made off” with some of the world’s richest people’s money, who were totally duped by him.
And get this…
He was turned in by his own two sons. Since the arrests and investigations, Madoff’s 46-year-old son, Mark, committed suicide.
A sad story indeed.
So what’s a Ponzi scheme?
It’s an investment program that promises to pay unusually high returns to investors after a specified period of time. The person running the program pays off the early investors from money paid by later investors who were told that they too can get rich.
The early investors are usually unaware of the fraud, and supply glowing testimonials of how well the program works, and how much money they’re making. But so much money is promised to investors that there is no possible way to get enough later investors to meet the investment promises. And then the House of Cards collapses.
The Ponzi scheme is named after Charles Ponzi (1882–1949) who was involved in a multi-million dollar fraud scheme where nearly 40,000 people invested about $15 million. This was a lot of money in the 1920s.
Oddly enough, not too long after Charles Ponzi was arrested for his pyramid scheme, Congress legalized one of its own.
It’s called the Social Security System.
When Social Security was first implemented, the maximum amount any one person paid into the system was $60 per year — a total of two percent from employee and employer of a maximum $3000 per year.
Today, the percentage is around 14% on up to $106,000 per year. This compulsory “contribution” is the largest legalized pyramid scheme in history.
It might not be so bad if we were getting anything close to a decent return on our forced contributions.
But latest estimates show that those born in the 1950’s may get a whopping 2.2 percent average return. Those born in 1975 will get a return of less than 2 percent. And it gets even worse for future workers.
Alternative plans have been much more successful…
In 1981, employees of nearby Galveston County, Texas chose to leave SS for a private alternative.
Not everyone was in favor of the innovative idea at first. And of course the unions opposed it.
Employees deposited approximately the same amount of money in private accounts as they would have had to “contribute” to Social Security. To date, the funds have achieved a higher annual rate of return. Many of these retirees are millionaires today, living off the interest and free to pass on their estate to their children.
This can never happen under Social Security.
With the proper investment in the right trending ETFs, you can provide your own security, social or otherwise.
And even on the low end of what we’ve easily been able to achieve – 3% a month – that totally slaughters the paltry return from the Social Security Ponzi Scheme.
A slow, steady 3-6% return a month will provide you a comfortable retirement. Get in the “plan” today.
Please call or email my office with any questions.
Helping you to retire comfortably,
Big A