A Dangerous Moment for Social Security
By Justin Spittler
Social Security funds are drying up…will there be any money left when you retire?
Social Security is America’s largest federal program. In 2015, it paid out $870 billion to more than 59 million Americans.
Most Americans see Social Security as a retirement savings program. During your working life, you pay 6.2% of every paycheck to Social Security. In return, the government sends you a check every month after you retire.
However, unlike a retirement plan like a 401(k), the money you pay into Social Security doesn’t land in your own personal account. Instead, it goes into one big pot called the “Social Security Trust Fund.”
The Social Security program pays retirees from this pot. As long as enough money flows into the pot, the program works, and retired people get the payments they expect.
• Last year, the Social Security Trust Fund lost money…
On Wednesday, Investor’s Business Daily reported (emphasis ours):
The Social Security Trust Fund just suffered its first annual decline since Congress shored up the retirement program in 1983.
The unexpected $3 billion decline is an indication of the precarious state of Social Security’s finances. Since 2010, the program has been paying out more in benefits than it gets in tax revenue.
In 1955, there were 8.6 workers paying into Social Security for every one person receiving Social Security. Today, due to America’s aging population, there are just 2.8 workers for every recipient. And that number will decline as the “baby boomer” generation continues to retire.
The Congressional Budget Office (CBO) expects Social Security to go broke within 13 years, according to Investor’s Business Daily.
Social Security’s cash shortfall is expected to rapidly escalate from $74 billion a year to $361 billion in 2025 alone, the Congressional Budget Office projects. Under current policies, the CBO says the trust fund will be gone by 2029.
• To fix Social Security, the government would need to cut benefits by 29%…
According to Investor’s Business Daily, this would bring the program’s costs in line with how much money it takes in.
The average retiree receives $1,355 each month from Social Security. A 29% cut would reduce that to $962 per month.
That’s not going to happen. Because senior citizens are a huge voting bloc, most politicians consider Social Security benefits to be untouchable.
• The U.S. government will continue to make promises it can’t keep…
To keep the scheme going, Washington will run bigger deficits. It will go deeper into debt.
Longtime readers know the U.S. government is drowning in debt. The federal government already owes more than $18 trillion. That’s 129% more than it owed a decade ago.
The federal debt is now bigger than the yearly output of the entire U.S. economy. The current debt-to-GDP ratio is 101%, the highest since World War II.
Programs like Social Security helped cause this financial wreck. Today, $0.72 of every dollar the government spends goes to entitlement programs like Social Security. In 1970, only $0.28 of every dollar went to entitlement programs.
• Casey Research founder Doug Casey says Social Security is a “gigantic Ponzi scheme.”
He says it’s “nothing but a vague promise backed by nothing but an impossibly debt-ridden government with financial problems that are about to get much worse.”
Here’s Doug.
By taking almost 15% of a person’s wages right off the top, Social Security makes it much harder for a poor person to save money. Worse yet, it makes people think they don’t need to save for themselves; it gives them a false sense of security. Even worse is that the money never really belongs to the presumed recipient; it’s simply another unsecured obligation of a bankrupt government.
Doug says millions of Americans who expect Social Security income won’t get it. He believes the Social Security program should be eradicated.
• We don’t expect the government to fix Social Security…
If you’re under the age of 50, you’ll probably never get a dime in Social Security payments.
However, we doubt Social Security will go away quietly. The government will likely try to “fix” it the only way it knows how: by printing and borrowing money.
As we mentioned earlier, the U.S. government is already drowning in debt. Printing and borrowing billions more to fix Social Security could wreck the economy. Or worse, it could destroy the U.S. dollar.
If you keep a significant portion of your money in assets tied to the U.S. dollar, we recommend watching this free video. It contains all of Casey Research’s best advice on how to protect your money from a U.S. dollar collapse. Click here to watch.
Chart of the Day
The Social Security Trust Fund lost money last year…
Today’s chart shows the Social Security Trust Fund’s annual cash flows. As you can see, the fund took in more money than it paid out every year from 1984–2014.
However, in 2015, the fund handed out $3 billion more than it received. It was the fund’s first deficit since 1983.
Unless the government reforms Social Security, the Congressional Budget Office says the fund will run out of money by 2029.
No need to print money.
Just add another 10% tax, a “SS make good” tax, to workers wages so that SS can be covered and the current 6.2% tax can continue to be used to fund other government operations as it is now.
Problem solved, an no borrowing or inflationary money printing required.
Sounds like the perfect excuse to nationalize(confiscate) IRA and 401k savings and add them to the SS trust fund. Throw in an economic meltdown and create a perfect situation for goobermint to save the people’s retirement savings.
I suggest SS and SSIB be abolished. Cut people a check for what they are
owed and be done with it. The taxpayer isn’t able to pay for these obligations,
and it is not fair to tax the young any longer. Alternatively, gov. could cut
foreign aid, (bribes) and a slice from other budgets, (The alphabets and military)
in the short term, but…really, all the welfare programs are for shite. Get rid
of them.
Suzanna,
Neither the taxpayer or the government can pay for cutting a check either.
Not unless they confiscate it from somewhere there is actually enough money available to confiscate, like maybe by nationalizing private retirement accounts (which has already been talked about at high levels).
And foreign aid won’t be cut for the same reasons welfare won’t be cut the, the government likes dependents and doesn’t care about non dependents.
Quick calculation…SS goes broke in 2029…I will collect 10 years worth by then–over $300k, which is approximately 3x what I put in over my working life (1.5x if you add the employer portion, which they don’t get back).
No wonder it’s going broke.
They only had a 65 year ‘heads up’ on the flood of Boomers coming down the pike. Not enough time to plan apparently.
From ssa.gov I found “A SUMMARY OF THE 2015 ANNUAL REPORTS”. The bottom line is SS cost about the same as Medicare and the same as Medicaid (each about 500 billion). SS and Medicare are paid out of income taxes and have begun to run small deficits whereas Medicaid is 100% general taxes (a 100% deficit). If they want to cut SS and Medicare 30%, they damned should also cut Medicaid and other Welfare 30%!
Quick question: Would Social Security Fund be solvent if ALL the contributions from workers – and they are considerable – had been invested with a modest return? My understanding is that the surpluses from the Social Security Fund were stolen by the government and used to wage war around the globe, thereby enriching bankers and the Merchants of Death. Or was the Fund not sustainable when the baby boomer started to retire in mass, even if all contributions has been invested? I have put this question to economists such as Gary North but I have yet to receive an answer.
For those that want to end SS – only agree if the other entitlement programs are ended also (Medicaid, Medicare, Gov’t Pensions, etc.).
It was a good idea until some Dem decided we needed a Great Society, and many others (both parties) decided on a warfare/welfare state, AND to borrow (not having a balanced budget).
FDR had to resort to tricks and a so called tax to mandate SS, same as Obammycare. funny, when a gun is hell to your head it is called an entitlement, suppose you could say shoot. i said screw this in 1981 during an audit, quit, farmers were not required at the time. today i doubt that is the case as the government will bleed every dollar there is in the private sector, no money no power.
There is only 1 fix for social security and its the same way you “fix” a dog; you cut its balls off.
No one is willing to do that
I’ve paid in since I was 13, 40 years. They moved the goal posts for retirement in the 1980’s so people of my age cannot retire until 67 so that will make 54 years of paying in just in time for the system to go bust. I so love our government, but also love being treated like a rented mule. Only another 14 years of beatings until I can drop dead.
Bob.
F&L…you’re right about the trick. FDR was told by a Supreme Court justice that the power to create SSI was in the Constitution. Most folks thought that it was insurance. It wasn’t until later after numerous court cases did the public realize that it was instead a tax .
Ida May Fuller:
.”The first recipients of Social Security were pretty much near retirement age or were at retirement age when FDR introduced the program. They were the real, true beneficiaries of this program. That’s when it took 16 workers to pay the taxes for those people that had not put anything in the system. Now, even though some people have misunderstood this, let’s tell you about the first recipient. Ida May Fuller. “On January 31st, 1940, the first monthly retirement check was issued to Ida May Fuller in Vermont. The first monthly check she got was $22.54. She was a legal secretary. She retired in November of 1939, so basically she got her benefits within 60 days of her retirement. She started collecting benefits in January 1940 at age 65. She lived to be 100 years old, dying in 1975. Ida May Fuller worked for three years under the Social Security program.
“The accumulated taxes on her salary during those three years was a total of $24.75. Her initial monthly check was $22.54. During her lifetime, she collected a total of $22,888 in Social Security benefits, paying in $24.75.” Now, it was a deal for Ida May Fuller and that’s just how Ponzi schemes work! The first participants get huge payouts. That’s the lure to suck everybody else in. Of course in this case, the people had no choice. Their taxes were, you know, after World War II, this stuff was all withheld because that’s when withholding started was during World War II, and it proved so miraculously favorable to the government that they never rescinded the withholding law and that’s how it got started. I never said that the first recipients didn’t get any benefits. “
They are not going to abolish FICA. People don’t have the money / discipline to save. If we don’t have SS then we will wind up with a lot of older folks that are destitute – and we’ll have to pay them welfare – six of one – half dozen of the other.
The government will continue to print money, until everything goes to hell.
SS and all the rest are the reason there is no deliberative solution to the predicament of democracy.
The future will roll out as it must. I suspect that even those who believe themselves “prepared” will discover that the tsunami will still swamp them (nearly?) as much as the oblivious people who predominate.
Regarding SS itself, I plan on it not being there. I also plan on the remaining pension in which I’m vested not being there.
I live small. Happiness is a lot easier to maintain that way.
PS: I have Casey’s “Crisis Investing for the Rest of the ’90’s” on my bookshelf.
Trust me when I suggest that one should not overly weight his writings on this subject.
The problem is SSDI and those recipients should be further scrutinized since it’s paying people for mental problems which can’t really be proven one way or another.
As far as the general fund goes, eliminating the income cap, or moving it higher would provide solvency for a much longer period.
Ending the “non-negotiation” over price with the drug companies clause would make Medicare much more affordable; right now all our money is being shoveled by the truckload to Big Pharma thanks to Billy Tauzin (R). As you’ll recall he got that passed in Con-gress right before he resigned to become Big Pharma’s leader.
“I so love our government, but also love being treated like a rented mule. Only another 14 years of beatings until I can drop dead.”
—-Bostonbob
Funny sarcasm. Then again, not-so-funny truth.
SSDI is simply welfare for otherwise able-bodied minorities who lack female genitalia and the minor children to go with them. It’s my understanding that a visit to any relatively urban SS office is like taking a shuttle to Mogadishu.
SSDI, IIRC, is already running off general revenue, its “trust fund” already depleted.
None of this is new.
None of this is going to change…until the entire house of cards pancakes on top of itself.
I’ve given up trying to forecast when that tragedy is imminent. 20 years of expecting the sky to fall has pretty much exhausted my useless predictive powers.
I’m fairly sure that the first “fix” to all this will be to means-test SS (and increasingly Medicare.) The goal will be to render anyone still in the Upper Middle Class poverty-stricken.
People with money have options. People without money are dependents. Politicians and the innumerable factions on the Left prefer the latter.
Creating dependence is also what “gun control” is about.
Look how much Germans (Brits, Frenchmen, etc.) can bitch about their immivasion when, if they are swarmed by orcs, they have to either run faster or call the cops.
That’s dependence.
Sorry to tell everyone, but Social Security is already broke and going “broker” every day.
This Social Security “Trust Fund” that gets bandied about is not a Trust Fund. The funds therein the so called “trust” can be invested in only one thing: U.S. Treasury Bonds. It is just yet another huge Ponzi Scheme that is unsustainable as Peter pays Paul, Paul buys U.S. Treasury Bonds (The proceeds of which the Federal Government immediately spends) and Peter, when he needs the money is left with whatever is left over after a combined inflationary/deflation which is roaring down the pipe at us with ever increasing speed.
Perhaps Peter can use the fiat Treasury Bonds to like a fire to stay warm but I doubt they will taste very good.
MA
The SS Program funds a lot of “disabilities” that have nothing to do with retirement per se and should be paid from General Welfare (Ida May Fuller paid in $25 but millions today pay in nothing): Social Security payments in 2014: 1) Old Age Survivors Insurance (OASI) was 714 billion (that includes payments to children, widows etc) 2) Disability Insurance (DI) was 145 billion (includingf payments to adults and children who are mental, behavior or emotional disabled) 3) Hospital Insurance (HI) was 264 billion 4) Supplemental Medical Insurance (SMI) was 344 billion (includes children). Funny that the Federals always want to know our race, sex, age etc but their SS Report Summary doesn’t have any such nor anything about illegals.
Means test it and cut Doug Casey off.
Via a report from Zerohedge:
“In the 2015 report of the Social Security and Medicare Board of Trustees they state very plainly:
“Social Security as a whole as well as Medicare cannot sustain projected long-run program costs…”, and that the government should be “giving the public adequate time to prepare.””
The Fed could eliminate all the illegal wetback golden parachute into the US.Start rounding them up and deport them all adios.Next audit congress and their corrupt no bid gov contracts.That would cover everyone senior and then some
Let’s be real here, the SS trust fund is empty because the government stole the money to fund other things.
I have two friends in their mid-fifties who enjoy life on SSDI. Their last jobs were so “stressful” because of mean bosses that they are incapable of working ever again. This is despite the fact they live completely normal, active, happy lives. They are at leisure. Maybe this won ‘t last?
Gayle, we lost nearly 80% of the guys due to a program ending. One guy conveniently went loco. I heard he was making bank on disability due to drug addiction/instability/disability. Another guy was already sick with alcohol problems, he said he was making more on disability than he did on the payroll.
I wouldn’t want to stay home and get paid for getting dunk. That’s like handing someone the reins to my life.
Prof Pangloss said a job pays you more than just money, it gives you a purpose and self-worth.
Fuck what Doug Casey thinks. SS should not be an ” entitlement ” program. You pay it in , you get to draw it. You dont? Tought shit. Like Suzaana stated, cut off a bunch of that FSA bullshit. More goverment never fixed anything. After a good stock market ass raping years ago, I decided to go with Plan B. A small 7 acre farm. I know I am gonna eat. Regrow and Reload.
Time for Soylent Green.
This, ladies and gentlemen, is a free glimpse at the future of quantitative easing.