Welcome to Way Off Wall Street, a column dedicated to providing Main Street opinions on topics of interest to investors. Each installment highlights the views of Americans who are far removed from the canyons of Wall Street -- and who often see things more clearly as a result.

I've spent a good deal of time researching and soliciting opinions about how people are looking at their own retirement in relation to the American economic downturn. Many people are looking at retirement with the same mind-set that they've always had. In many cases, I found people believe that our economy will recover rather quickly. In others, I suspected they are intentionally blinding themselves from the truth that this could be a very long economic downturn.

Since today's retirement realities is such a big topic, I'm going to discuss it over two posts. This first one concerns the group of people who either have already retired, or expect to retire within the next five years. My next column will cover people who have more than five years until retirement, as well as those people who believe that the word "retirement" will never truly apply to them (I myself fall into the latter part of the second group).

Baby Boomers, in some cases already facing the 'double demands' of caring for kids and aging parents, have another economic concern, at least for the next phase of the housing cycle: substantially lower household net worth, as a result of declining home prices, so says a Washington-based think tank.

The Center for Economic and Policy Research says the median households head by those ages 45-54 in 2009 will have about 25% less wealth than the similar demographic in 2004. In dollars, household wealth will decline to $113,268 from $150,113.

Further, the above assume March 2008's housing prices hold for 2009: if they don't and prices fall another 10%, household net worth declines by about 35%; 20%, by about 45%, the CEPR said.

Economist Peter Dawson, who is not affiliated with the CEPR or the study, told BloggingStocks part of the problem was "unreasonable expectations regarding home appreciation rates, the belief that 10-15% real estate gains would continue for decades. It got too many adults out of the traditional saving and investing mode and into thinking their home would serve as a major return on investment." Most homes do appreciate, and they can help build wealth, Dawson said, but homeowners must think in terms of a 6-9% average, annual appreciation rate, "which is a more-realistic return for residential dwellings."

With a sluggish economy, uncertain job growth, the most serious housing recession in more than 20 years, record oil and gasoline prices, ramping food costs, and a foreign policy landscape that's challenging (to say the least), decision makers in the United States, public and private, have more than enough to be concerned about, near-term, most analysts and citizens would agree.

Still, the above wasn't enough to prevent the annual "alarm sounding" about long-term concerns, such as Social Security and Medicare, the likes of which occurred again this week when the Social Security Trustees released their revised 2008 actuarial balance, which is a status report.

Moreover, while it's never prudent to ignore the tax and benefits implications of entitlement programs as large as Social Security and Medicare, it's important that investors and taxpayers also keep in mind one undeniable reality pertaining to statistical analysis of this sort. Namely, that we're dealing with longitudinal projections stretching out decades in which -- if any one of 20 variables (or more) change -- receipts and outlays would change substantially.

While it comes as no surprise, both Medicare and Social Security are financial disasters waiting to happen. In a report issued today by trustees of these two large government programs, while the dates of bankruptcy are unchanged, the date of the programs being cash flow negative have moved up to a date closer than was previously thought.

According to an AP report: " The first year that payments will exceed income for Social Security will occur in 2017, just nine years from now, reflecting growing demands from the retirement of 78 million baby boomers. Medicare is projected to pay out more than it receives in income starting this year.

"The financial difficulties facing Social Security and Medicare pose enormous challenges," the trustees said in their report. "The sooner these challenges are addressed, the more varied and less disruptive their solutions can be."

Long hailed by free market economists as the model for how to create a pension system, news out of Chile that it plans on making payouts to low income seniors, has government interventionists jumping for joy.

The AP writes:

The new $2 billion-a-year program will expand public pensions to groups left out by private pensions - the poor and self-employed, housewives, street vendors and farmers who saved little for retirement - granting about a quarter of the nation's work force public pensions by 2012.

The fact is that this move is the way that governments should generally function. Stay out of things unless there is a real need to do something. No one is of the opinion that low income seniors should be thrown out into the street. Of course they should be helped. I would rather see the community take care of them and set up a network of charity, but if that doesn't work, then the government should step in.

What government interventionists miss is just how successful the 1981 pension reform has been.

In an excellent column for Forbes, Ken Kam explains what's really wrong with Social Security. Forget the politics and the debate about its future solvency -- Kam explains it this way: When his daughter was born, he realized that if he could invest $2 thousand for her each year of her life and grow it at 11% a year (An aggressive target, but we'll go with it), that money would have grown to $1 million by her 40th birthday -- and $30 million by her seventieth!

What does that have to do with Social Security? Most people put in more than $2 thousand per year -- a lot more. And yet Social Security will never provide them with anything like that kind of a nest egg.

Albert Einstein is widely quoted as having said that compound interest is the most important mathematical discovery of all-time -- or words to that effect. And yet our federally mandated retirement system fails to take advantage of it, instead opting for what amounts to an elaborate Ponzi scheme, sustainable only by the rule of law and population growth.

Mr. Kam talks about his idea for a "Bicycle Trust" as a way to "assist our children in their efforts to become self-sufficient, valuable members of society. Just as a bicycle enables you to travel farther and faster than being on foot, our trust should amplify our children's own efforts to develop their abilities so they can go farther and faster than they otherwise would have."

There's a link to more information in the column, and it's certainly worth checking out.

In the weeks ahead, BloggingStocks will take an in-depth look at the U.S. dollar's decline, its impact on the global and U.S. economies, as well as on job creation, trade, and investment.

Remonstrations about the weak U.S. dollar are getting to be a little bit like what Mark Twain said about the weather:

"Everyone seems to complain about the weather, but no one ever seems to be able to do anything about it," Twain said.

Similarly, everyone seems to complain about the weak U.S. dollar, but no one ever seems to be able to do anything about it.

This time it was former U.S. Treasury Secretary Robert Rubin, who Tuesday told Bloomberg News that relying on a falling currency to increase exports isn't a "sound approach" and said policies should be implemented to strengthen the dollar.

In a New York Times column dripping with sarcasm, the brilliant Ben Stein wonders whether we should give top hedge fund managers some taxpayer dollars to manage:

Supposedly, a number of wizard managers consistently earn more than 40 percent a year for their hedge funds. Yes, I know that this conflicts with every bit of investment and market theory -- or almost every bit. I know that such a thing should be impossible. But, supposedly, magicians like Steven A. Cohen, founder of SAC Capital in Stamford, Conn., can regularly earn 40 percent a year -- often more -- on their capital.

But why waste our time on envy or disbelief? Let's put Mr. Cohen to work for the greater good. Let's have the federal government issue about $10 trillion in Steven A. Cohen National Debt Retirement Fund Bonds. After interest is paid on the bonds, if Mr. Cohen makes 40 percent on the money, the fund will return 36 percent a year. That means that in only two years, he will have made roughly $10 trillion for the taxpayers, with which he can pay off the entire United States federal debt.

AOL Money & Finance recently provided us with an insightful article regarding the current and future condition of our nation's government-administered retirement system. That article, written by Richard Wolf for USA Today, was as good an explanation of the current state of the Social Security funding horror that I've ever read. What Mr. Wolf failed to hammer home was the fact that this situation isn't really news. I officially entered the manufacturing work force in 1979, and I'll tell you what folks, I knew at that time that the Social Security system would most likely be nothing to me but a tax on my income. I didn't expect I'd ever get a dime from SS then, and I still don't.

Honestly now, why not just stop howling about it and accept the reality of the whole mess? Those clowns in DC have tangled our courts, hamstrung our unions, disemboweled our public schools, castrated our military, flattened our industrial base and they're doing a fine job of bankrupting our retirement system. Did you really expect any different? Did you think that a government riddled with millionaire businessmen and back-room lawyers would vote themselves a wage freeze until they got things straightened out for the rest of us? HA! I'm just glad that I'm able to work two jobs so I can afford to pay my full state and federal tax burdens and still have the $2,000 it will cost me to heat my tiny home this winter. Life is good.

Until and unless there are some drastic changes in our nation's capital, in the form of an independent president with stones, nothing is going to change. We'll hear the same old tired rhetoric from the same old twisted mouths with the same pantie-waisted results and all the while they'll take a couple percent more from your hand each year. We're a once-great nation that's been diluted with government lies in pursuit of global socialism and they're not going to stop the carnage until we're a cashless society with every virtual dollar passing thorough government hands between the time you earn it and the time you spend it in a government-accredited manner. Yeah, it's an ugly picture, but it's the picture they're painting in the chambers of our government right now.

Where are Ross Perot and Jimmy Hoffa when you need them?

USA Today writes about the first baby boomers retiring next year at a rate of 365 an hour. The articles goes on to use terms for the fix that feed into the fears the current Administration is raising about the event. But is the crisis truly that bad? Yes it's true a fix is needed for Social Security, but if you look closely at the numbers used even in the USA Today you'll see that the fix is not that drastic. As long as we take it seriously and do something.

In the story USA Today states the fix would need to be a 16% increase in the existing payroll tax or a 13% cut in benefits. First let's look at that 16% in actual tax rates. The current tax rate for Social Security is 15.3%, which is 7.65% paid by the employee and 7.65% paid by the employer. Were the Congress to decide to fix the system solely by using tax increases then the increase would be 2.448% or 1.224% for the employer and the employee. That added would move the total tax collected to 17.748% (or 8.874% from one's paycheck). When a cut in benefits is discussed options always look at future promised benefits. The cut would not impact those currently collecting Social Security, but may include a number of different things such as increasing the age for retirement, reducing the COLA increase, or some other combination of benefit changes.

The fairest way to fix the problem would be a combination of tax increases and cuts in promised benefits. Let's say we cut responsibility for the fix in half - an 8% increase in tax rates or 1.224% shared equally between employer and employee: each paying 0.612% more in taxes. Would you be willing to pay that to secure Social Security for at least 75 years? A cut of 6.5% in promised future benefits would be necessary if the fix is to be shared by all.

USA Today reports that at age 62, America's first baby boomer opted into Social Security today. The question for America is whether the 80 million people born between 1946 and 1964 will bankrupt Social Security by the time all of them are receiving their payments.

The caseload for so-called entitlements -- Social Security and Medicare -- is going to explode in the next 23 years. By 2030, Social Security's caseload will be 84 million people, up from 50 million today. Medicare will go from 44 million beneficiaries to 79 million. That will leave about two workers paying payroll taxes for every retiree. The tab is estimated at $50 trillion in future obligations over the next 75 years. Social Security will rise from 4% to 6% of the GDP, and Medicare will go from 3% to 11%.

The options are not good. Fixing Social Security solely with higher taxes or cuts in spending would mean a 16% increase in the payroll tax or a 13% cut in benefits. Medicare's needs would be far greater: a 122% payroll tax hike or a 51% reduction in spending, just for hospital care. Unfortunately, the longer we wait to fix the problem, the more it will cost.

However, if history is any guide, we'll wait until a crisis before we find the will to act. And that crisis will fall on the shoulders of the baby boomers' children and grandchildren -- not much of a legacy.

Peter Cohan is president of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter.

Some BloggingStocks readers have been kind enough to comment on my blog post regarding the tax protest undertaken by Mr. and Mrs. Brown of New Hampshire. It seems to me that in light of the many ways in which our government has mishandled issues with its citizen over the last several decades, the issue of taxation should be taking more of a front seat. Not a one of us enjoys paying taxes, but most all of us agree that they are a necessary evil. Many of us see serious inequities and abuses in the system. I'll clarify some of my positions on the subject and I'll certainly provide some fuel for debate.

I don't disagree that the Browns have a right to protest their taxes in their own way, but what they are doing is, in my opinion, selfish, short sighted, ill-thought-out, and probably illegal. They are acting like the little child who hurls insults at the boogie man from under the covers. They buttress their actions by claiming that the system is so completely broken that any attempt to work with it is useless. Therein lies my reason for suggesting they should go elsewhere. There are a hundred ways that the Browns could stage an open, effective, and legal protest. They, however, have chosen to hide themselves in protest. In my opinion, they are shameful, loud-mouthed cowards.

Does our government overtax us? You damn bet they do. When hard-working citizens reach a certain income level, their governmental tax load is between 30% and 40% of their income. It approaches 50% if you add in all the permits, licenses, user fees, and a host of other city, county, and state hidden payouts. To me this is completely unacceptable. I've been saying for quite some time that, if you consider that our incomes start with a finite 100% and the governments keep taking one additional percent after another, how long will it be before we no longer have the funds to effectively operate as a public? Even more upsetting to me than the amounts of the funds taken is the fact that we have little to no say in how that money is spent. Taxation without (effective) representation? It wouldn't be too hard to argue that such is the case.