Did I achieve a journalistic milestone? I got my first tip from an insider. What I learned is darn important for our readers.
Our article “The Social (IN)Security Charade”, discussed how the government gave us a COLA increase and took it right back by increasing medical premiums.
The tipster confirmed I was spot on – however, I barely scratched the surface. While I prefer interviewing the experts, he politely declined, wishing to remain anonymous (now John Doe).
John’s concerned; all generations need to know the facts, so they can plan accordingly. After following his research suggestions, I’ve come to a conclusion about social security.
| Things are WORSE than I imagined, going in the WRONG DIRECTION, and many changes are hidden from the public. |
Americans depend on social security
In a Motley Fool article Sean Williams tells us:
“Social Security is, for many Americans, a vital source of retirement income. …. just 8.8% of seniors currently live in poverty compared to an estimated 40.5% that would be living in poverty if Social Security didn’t exist. (Social Security) is counted upon by better than 3 in 5 retired workers to comprise at least half of their monthly income ….”
The government’s impossible promises
The Center on Budget and Policy Priorities provided a graph showing us how our 2016 federal tax dollars were spent:
Government programs, regardless of whether they are earned like veterans or promises like medical care, comprise the majority of the budget. Add the recent increase in the military budget and ever-growing interest on the debt and there is little room to maneuver.
| The politicos know they can’t keep their promises. Their political challenge is to find ways to weasel out of the commitments, blame their political opponents and avoid a public uprising. |
Borrow – tax – spend
During FY 2016, the government borrowed a record amount of money in an effort to prevent the uprising. CSNnews.com reports:
“In fiscal 2016, which ended on Friday, the federal debt increased $1,422,827,047,452.46,
according to data released today by the U.S. Treasury.
…. The total federal debt now equals about $165,575 per household.”
The most cruel, hidden tax of all – inflation
The Social Security Administration (SSA) outlines a major 1983 change – taxing some of your benefits:
“If the taxpayer’s combined income … exceeds a threshold amount ($25,000 for an individual, $32,000 for a married couple filing a joint return), the amount of benefits subject to income tax is the lesser of 50% of benefits or 50% of the excess of the taxpayer’s combined income over the threshold amount.”
In 1993, a second bracket created an 85% threshold.
The government has never adjusted the brackets for inflation. This becomes a never-ending stealth tax increase for millions of social security recipients. The US Inflation Calculator illustrates how dramatic the hidden increase is:
Had the brackets been adjusted for inflation, those with a combined joint income under $78,753 would not pay any taxes on their social security benefits.
A 2015 SSA study tells us:
“In 1984, less than 10 percent of beneficiaries paid federal income tax on their benefits. …. (SSA) projects that 52 percent of families receiving Social Security benefits will pay income tax on their benefits in 2015.”
It’s going to get worse
John Doe suggested I look deeper into “why” the COLA increase didn’t reflect true inflation, and “why” the government took it back in increased healthcare premiums.
The Bureau of Labor Statistics (BLS) calculates inflation in a few different ways:
“From 1913 through 1977, BLS focused on measuring price change for groups of urban wage earners and clerical workers, or what BLS now calls the CPI-W. …. The CPI-W population represents about 28 percent of the total U.S. population.
…. As part of the 1978 revision, BLS planned to introduce a broader target population, covering all urban consumers (the CPI-U). The … group represents about 88 percent of the total U.S. population.
BLS initially announced in April 1974 its intention to replace … the CPI-W with the broader CPI-U population. That decision, however, was criticized by some … members of Congress ….
As a result, since 1985, the two indexes have differed only in the expenditure weights assigned to item categories and geographic areas. While the CPI-W is used to calculate Social Security cost-of-living adjustments, most other COLAs cited in federal legislation, such as the indexation of federal income tax brackets, uses the CPI-U.”
John suggested investigating CPI-E (as in elderly). I’d never heard of it.
The National Committee to Preserve Social Security and Medicare tells us:
In 1987, …. Congress directed the Bureau of Labor Statistics (BLS) to develop an index focused on the elderly. BLS then developed the Experimental CPI for Americans 62 Years of Age and Older (CPI-E) ….
…. Research has shown that … seniors 65 and older spend more than twice as much on health care, and those 75 and older spend nearly three times more on health care than younger consumers.
Not only do health care expenditures steadily increase with age but healthcare costs have also consistently risen much faster than other market basket categories. The current price index (CPI-W) does not take these critical differences in the elderly population into consideration.
| “Seniors spend a significant portion of their income on out-of-pocket health care expenses not covered by Medicare. As time goes by, more and more of their Social Security benefit checks will be eaten up by rising health care costs.” (Emphasis mine) |
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Why hasn’t the government used CPI-E in calculating the COLA benefits?
This AARP graph answers that question.
Focus on columns 1-2 & 4. If you started with a $1,000 monthly check in 1983, in 2004, using the current CPI-W, you would receive $1,848.70. Using the CPI-E method it would be $1,991.19.
The government doesn’t want to spend the money – you must pay your higher medical costs and cut back somewhere else!
Let them eat hamburger
Income tax brackets are also indexed to inflation. ThinkAdvisor.com reports about another recent hidden tax increase:
“Under the new legislation marginal personal tax rates, tax credits and the standard deduction, … are indexed to inflation using the Chained Consumer Price Index … or C-CPI-U, instead of the more traditional CPI-U.
The chained CPI, like traditional CPI measures, tracks the prices of a basket of goods and services but adjusts for changes in purchases as consumers substitute cheaper products and services for more expensive ones.
…. Linking tax brackets to the chained CPI means taxpayers will move more quickly into higher brackets as their incomes rise, but the tax credits they receive and standard deduction they take will rise more slowly.” (Emphasis mine)
If the price of steak gets too high, heaven forbid – don’t raise the CPI – substitute hamburger!
What if hamburger gets too high, do they substitute dog food?
What comes after dog food?
In the 1970’s doom & gloom pundit Howard Ruff suggested, “If things got tough at home, I suppose we could eat the Labrador retriever.”
No wonder friend Chuck Butler calls them “hedonic adjustments.”
| Inflation is a stealth tax, robbing seniors and savers of buying power each month. The politicos know social security benefits don’t keep up with inflation – and they don’t care! Their focus is on finding ways to inflate their way out of debt. |
How long before chained CPI is used for Social Security?
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The Medicare Challenge
The Tax Policy Center tells us, “The Medicare trust fund finances health services for beneficiaries of Medicare …. It is financed by payroll taxes, general tax revenue, and premiums paid by enrollees.”
In 2015, premiums were approximately $82 billion, while $272 billion came from general tax revenue.
More political games
The politicos are fighting over repealing Obamacare. Free health care is expensive and they want to hide that from the public.
The political trick is to announce a nice COLA benefit for retirees, and then take it back in medical premiums. It doesn’t save the government a dime, but it makes the cost of government medical care look cheaper.
A little known “hold harmless” provision has protected the majority of retirees. It mandates Medicare Part B premiums cannot be raised if it reduces social security benefits.
USA Today tells us that protection recently (and quietly) disappeared:
“In order for you to be among those … held harmless … you must have been enrolled in Part B before 2017 with premiums deducted from your Social Security check. If you’re delaying Social Security benefits but are benefiting from Medicare Part B, the protection would not apply ….
…. Hold harmless also does not apply to those 5% of beneficiaries who fall into high-income brackets.”
The SSA encourages seniors to defer their benefits, promising larger checks if you wait to file. Deferring benefits was considered an inflation hedge. The government quietly removed the safety net. The guarantee that social security checks will never be reduced because of rising medical costs has vanished!
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The Inconvenient Truth about Social Security Never expect a real COLA increase. Inflation will reduce your buying power every month. Expect higher medical premiums. Expect means testing. Expect all benefits will be taxed in the future. You are responsible for your well-being, not the government! |
Government created inflation is a stealth tax like carbon monoxide. It’s hard to detect and can be disastrous.
In our recent interview with Chuck Butler he recommended that gold and silver should be 20-25% of your portfolio to combat inflation.
Protecting your nest egg from inflation must be part of your retirement plan – the government isn’t going to help you!
And Finally…
“If you always protect your offspring in a cocoon they will never learn how to fly…”
For more information, check out my website or follow me on FaceBook.
Get your FREE Special Report:
10 Easy Steps To The Ultimate Worry-Free Retirement Plan
Until next time…
Dennis
www.MillerOnTheMoney.com
Bullshit The fact is the government cannot stop paying Social Security because of your 40% fact any more than they can stop paying the 99% black welfare. Why??? The people old or black would riot and/or throw out the politicians doing it. The Fed will continue to have the treasury print money ( worthless as it may become) until pigs fly. Why because they are the real pigs on the teat and do not want to lose their political power, position, or privileges. So Social Security will be there just maybe at some slowly reduced rate of pay just like the false CPI index gain.
Old people don’t riot…
But the major point is that you will be receiving a SS check that buys very little, no matter what its nominal amount is…
The treasury doesn’t print any money you idiot! Only the Banksters do! Telling the treasury to print a competing currency is what got John (I am gonna fuck you cause I am a commie) Kennedy killed.
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Robert (QSLV)
SS/Medicare, by their own estimates, is unfunded by $42 trillion. Uh-oh. How can that end well?
Dick says that the SS rate will “slowly reduce”. Good luck with that. What cannot be paid will not be paid. It will slowly reduce for a while, then collapse, either substantially or entirely. $42 trillion unfunded cannot be addressed by “slowly reducing”. In the end, it will be slashed, or it will collapse entirely.
Very interesting, especially that ‘hold harmless’ provision that expired in 2017. I always thought get your SS benefits as soon as you can because a bird in the hand and all that because, as with any Ponzi scheme, only those who get their money out first get paid.
I also expect the government to welsh on Roth IRAs and make that income taxable too or at least reduce SS benefits by some proportion of your tax free income.
I suspect low income elderly will have to live in barracks type accommodations if they don’t own a paid for home. No way can the government afford to build even studio sized senior housing for the numbers of destitute seniors heading their way.
Keeping the chained CPI down is the only way to keep this scam going. It allows them to steal more and more each year through inflation, and also helps keep SS solvent. This is also why they are so hellbent on flooding the country with illegals. That helps keep the chained CPI suppressed in a world where healthcare and tuition and many other expenses are soaring.
The poor poor pitiful Useful Idiot Democrats howl about all the wasteful Defense Spending blowing the Budget (which is over 50% borrowed from the Fed) when Defense is only 16% while Welfare is 59% (but I’d also throw in Education and Benefits for Federal Workers which are another 10% more Transfer Payments). But by definition, the Useful Idiots don’t know Math, Economics, or anything much beyond sex, drugs, Gladiators and what their Elite Controllers tell them on the Nightly NYC Propaganda (the Fake News). If we yield and give them that 16%, how far would it go in their Rainbow and Unicorn World.
But the defense budget, more than $1 trillion counting the black budget, remains an enormous waste, as do our overseas bases in more than 100 countries…
This is the fourth time I’ve read this letter, Dennis, it doesn’t get any better does it?
Interesting Dick, but if just printing more money is the answer then why worry about a debt ceiling, or going to work every day, or even taxing citizens a dime.
Just print some money, hell, don’t print the money to save paper and ink, just create the money and the government can declare America debt free and everybody gets a happy golden retirement.
Or maybe we do it like on Star Trek, nobody works for money, they work for status and the betterment of humanity. All we would need are some dilithium crystals to create unlimited energy from antimatter/matter reactions and replication technology to save finite resources eliminating the need for money.
Either scenario is fantasy.
The reset is coming, 4th Turnings……
I’ve found the dilemma is best explained this way.
Imagine if the Federal Reserve bank credited every bank account in America with $10 million dollars. Tomorrow some would head to Porsche/Bentley dealership to buy a new car only no one would be there because the employees at the Porsche/Bentley dealerships would be out looking at 5o foot yachts, only no one would be at the yacht sales marina because they would be out looking at new houses and so on. You couldn’t even get a hamburger at McDonalds because millionaires don’t flip burgers.
Bentleys to burgers, all prices would adjust to compensate for the weimar dilution. Nobody’d be better off; everybody’d be worse off.
The key to hot money is being nearer the front of the queue. No queue – simultaneity – everybody screwed simultaneously.
But some people would inevitably know in advance, and would buy up goods before the prices went up by a factor of 10…
Yup. That’s the A to the Q, too. Why’d anybody ever want anything to do with the political cracker class? To get closer to the ritz, o’ course.
If yer left hand’s releasing the info, & yer right hand’s dialing yer broker, or yer proxy fer brokerage…or brokers are quid pro quoin’ ya with winnin’ cattle trades, well, the frontrunnin’s – what sitizens are for – gonna’ pile up.
Hi Card802,
I was shocked when I started the research that I outlined. It is worse than I imagined. Bottom line is the government is doing what it must to protect those in power – at the expense of hard working Americans.
On the positive side, many Americans are industrious enough to work around the system once they understand the game. That’s why I wrote the article.
I feel sorry for the next generation, they are paying for our social security, trying to save for retirement and will probably have to work well into their 70’s in order to survive.
I fear we have passed the point of no return. Someday there will probably be an ugly reset. The politicos know that and are trying to kick the can down the road so it does not happen while they are in power.
Best regards,
Dennis
Every point of passage is no return: you pass it, you bought it.
Another antisocialsecurity bit I just became aware of: an ex-wife can collect half of her former spouse’s Madoff. But ex-hub doesn’t lose that half – ex-wife gets that ½ on topo’graftical ex-hubby’s “treasure”(booty)map.
Ti-i-i-me — & a half – is on my side, yes it is…lol
Well Dennis, the important thing for us X’ers is that we’re here to get properly fucked for you boomers, you know….so your check clears. Ours, don’t worry – we’re fucked and have known that for sometime. It’s the least we can do for ‘our seniors’. Welcome to the jungle.
Gen Z will not be getting any SS, and they know it. So they are not going to want to contribute when they grow up….BTW, the national debt will be $100 trillion+ within 25 years at the current rate of progress.
Damn that’s like Japanese money.
“You are responsible for your well-being, not the government!”
The cops have no duty to defend. & never did. At the outset, the promise is the hook. After addiction grabs hold, the pretense is no longer necessary…even tho the jawboning continues.
There will ALWAYS be a check that comes. What you will be able to buy with it is what will show the real impact. The suckers will always be placated with the check, regardless of how little it buys.
Those at the top of the Ponzi pyramid always get their money, while those at the bottom seldom do. Government welfare is ALWAYS unsustainable and whether you were stolen from your entire working career to pay into what you would like to believe was a “retirement” account or whether you were simply stolen from to pay for the benefits checks of those who retired before you is just an issue of government and verbal semantics. The truth is the same. Government steals to buy votes and makes promises it can never keep unless it continues to steal, borrow (future theft), or print money (theft from everyone through the hidden tax of inflation).
There will always be a check that kites….
I have said this before but it’s worth repeating .Never have I eat dog food but cat food is not so bad so if push comes to shove you can survive on Doggie food.You just got to be real brave those first couple of bites but if you’re real hungry you will be your own Knight in shining armor.?
Not long ago I was behind an old guy at the grocery store. (I’m old but this guy was even older) What he bought was two cans of cat food and a small bottle of teriyaki sauce. He looked like a homeless person and my impression was he wasn’t buying for a cat.
So maybe eating cat food is now a reality for some, or do cats like teriyaki sauce?
The usual idiocy with Social Security reporting.
Social Security has been collecting a surplus almost since its inception. The total surplus over the life of the program is approaching the $2 trillion mark. The surplus exists even today.
The above article carefully only talks about Medicare. Medicare is a shit show, but then again Medicare is part of the entire health care disaster in the United States.
Yes, Social Security COLA games are being played bit that’s because the federal government has been spending those SS surpluses and doesn’t want to have to start paying them back (into Social Security) anytime soon.
The debate isn’t about SS itself.
It is about this massive amount of money owed by the federal government.
Congress has the Constitutional authority to simply issue interest free money and pay off any and all debts.
In the end, endless printing of money, regardless of interest rates, gets you the same outcome.
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Ah, (virtual)life inside the board game….
Which makes no difference at all…or do you think Venezuela is a viable model?
Anon might be an officer•apologist of the court, an ossified in the ossuary. Parliamentary “reality” creates its own “laws” & ‘makes it so’ via laws rockets, other offensive force majeures.
But even their real ordinance is blanks. Greatest trick the Blankfeins ever pulled was convincing the world their blanks were real.
Hi,
While they have been collecting a surplus, they spent the money and put IOU’s in the trust fund. It became a Ponzi scheme for years with more money going in to the government than what was being paid out. Now it is reversed – government is paying out more than it collects.
Here is the latest graph. Check it out… https://www.pgpf.org/chart-archive/0030_social-security-deficits-gdp
Best regards,
Dennis Miller