Don't Fall for This $2.6 Trillion Heist

Written By Brian Hicks

Posted October 1, 2011

The world is full of crooks and liars…

No ordinary con man, Charles Ponzi was perhaps the most famous swindler of them all.

A nearly penniless Italian immigrant, Ponzi bilked investors out of millions in 1920.

He promised his investors a 40% return in just 90 days. Not surprisingly, the line to sign up stretched four blocks down the street…

But as everyone came to learn, King Ponzi had no clothes.

Behind the curtain, there was absolutely nothing. The promised investments in postal stamps were never made, and Ponzi’s scheme collapsed under its own weight.

All he had done was rob Peter to pay Paul…

A $2.6 Trillion Heist

Since then, the term “Ponzi” has been associated with any scheme that is destined to fail.

One of these is Social Security.

And while I have no problem with keeping promises to retired folks, I know there is nothing in the trust fund but the word of politicians.

As Senator Tom Coburn (R-OK) admitted recently, “We have stolen $2.6 trillion from [Social Security]. We put paper money in there. But the problem is we spent the money. We didn’t just take it. We took it and spent it.”

To make matters worse, the Social Security system is now paying out more in benefits than it receives in FICA taxes — to the tune of $105 billion over the last two years.

That figure will only get worse as 10,000 baby boomers join the ranks every day for the next 19 years.

In fact, according to the Social Security’s own estimates, the government pension system will run dry in 2036. That’s 25 years from now. It may seem like a long time, but it’s a drop in the bucket. 

Of course, that’s the government’s own estimate; others (like me) believe that day could actually come 10 years earlier.

In this case, the numbers just don’t add up. The sad truth is they never will.

Two people working to support one retiree is a system destined to fail…

This means younger investors should be planning for a future without the funds provided by the troubled program. Besides, even at current levels, Social Security benefits only replace 16% of the income for married couples earning between $50,000 to $100,000, and only 9.5% of the income of married couples earnings over $100,000.

For many, that will create a something of a “lifestyle gap” without the proper planning.

Time to Build the Nest Egg

That’s why I continue to recommend dividend stocks as the best way for investors to build true wealth without relying on a Social Security check.

In fact, my Wealth Advisory subscribers have been working their way to financial freedom using income investments for some time now, earning 218% net gains in the last three years.

That being said, here are three great companies you can begin to build a portfolio with today to retire comfortably tomorrow.

Each and every one of them pays a better yield than anything you can find at a bank or in the Treasury markets:

  • Abbott Laboratories (NYSE: ABT): A diversified health care company, this is a stock you can safely add any time on weakness. The 3.8% current yield is well above average for this type of company, and the 62% payout ratio suggests future sustainability. What’s more, ABT has increased its dividend payouts for 39 straight years. With a forward P/E of 10.35, this is potentially a $63.00 stock.
  • McDonald’s Corporation (NYSE: MCD): I can’t say I’m a big fan of their food, but it’s hard to deny MCD is one well-run global machine. Recession or not, food is always moving out of the Golden Arches. The burger behemoth has raised its dividend for 34 years in a row while producing a ten-year annual dividend growth rate of 26.50%. MCD pays a 3.10% yield at current prices.
  • Realty Income Corporation (NYSE: O): This is one of my all-time favorites. Realty Income has one of the best business models to speak of and pays a 5.1% yield. The dividend is supported by the cash flow from over 2,500 properties owned under long-term triple-net lease agreements. To date, the company has paid 492 consecutive monthly dividends while raising the payouts 62 times since 1994.

As for Social Security, it’s a train wreck I’m not counting on — and neither should you.

As for some other places to start building a lifetime of wealth, our editors have put together a few of their best ideas for the years to come in this week’s top-read articles from Wealth Daily and Energy & Capital, below.

Have a great weekend.

Your bargain-hunting analyst,

 steve sig

Steve Christ
Editor, Wealth Daily

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