Guest Post by Simon Black
In the year 1348, after more than a decade of war with France, Kind Edward III of England noticed that many knights who returned home from the front lines had become completely impoverished.
The war had taken a massive financial toll on Edward’s men. Some of them had been captured in battle and forced to sell all of their property in order to ransom themselves. Others had become grievously wounded, and their permanent disabilities prevented them from earning a living.
So the King created a special foundation to care for some of these men, who became known as the ‘Poor Knights’.
Those who were admitted into the foundation received an annual pension of 40 shillings, worth roughly $3,000 in today’s money, plus free room and board at the College of St. George.
It was a nice idea. But naturally it didn’t take long for Edward’s pension fund to become mismanaged.
The pension fund was in such dire financial straits, in fact, that it was typically only able to provide for three ‘poor knights’ at a time.
Eventually– and I’m talking hundreds of years later– the pension was ultimately restructured (i.e. bailed out) by King Henry VIII, and later by his daughter Queen Elizabeth I.
Financial mismanagement and bailouts have been the common fate of pension funds throughout history.
Emperor Augustus of the Roman Empire, for example, established a retirement fund for his legionnaires called the Aerarium militare. But subsequent emperors couldn’t resist dipping into the fund to pay for their lavish lifestyles and pet projects. So the aerarium ultimately went bust.
Today pension funds around the world are in a similar position– and this is not a controversial statement. Even the OECD acknowledges that the worldwide ‘funding gap’ of public and private pensions runs into the tens of trillions of dollars.
To put this figure in context, the United Nations projects that adaption costs from climate change will run approximately $10 trillion over the next thirty years.
Furthermore, the Institute of International Finance estimates that COVID-19 has cost the world a whopping $24 trillion.
And yet, according to the US government’s own financial report, the long-term unfunded pension liability JUST for Social Security is $55.9 trillion– more than the cost of climate change and Covid-19 COMBINED.
I bring up the examples of Covid and climate change because they’re two of the most vocalized issues in the world right now. Everyone is screaming about masks, vaccines, and the environment.
Yet hardly a word is uttered anymore about the pension crisis, even though, at least from an economic perspective, it completely dwarfs the other issues.
It also keeps getting worse.
Inflation, for example, is an enormous problem for Social Security.
Even before the pandemic, Social Security’s key trust fund was projected to run out of money by the early 2030s.
But last year’s Covid lockdowns meant that millions fewer people were employed and paying in to the Social Security system; that means a LOT less revenue for the program.
And now with inflation surging, Social Security has to make Cost of Living adjustments and increase the monthly benefits to its tens of millions of recipients.
These are pretty much the worst possible conditions for the long-term health of Social Security. And it means that the trust fund will likely run out of money even sooner than projected.
It’s ironic that, last year, the Social Security administrators actually reduced their long-term inflation forecast.
In other words, the trust funds’ projections are based on certain macroeconomic assumptions. And the administrators assumed that the inflation rate would be 2.4%.
Actual inflation is now 5.4% (according to the US Labor Department). And the long-term rate of inflation over the last 50 years has averaged 3.9%.
Here’s another one: Social Security assumes that the real interest rate on its investments (i.e. the amount of money it earns AFTER inflation) will be 2.3%.
Wrong again! The actual real rate of return they’re earning is now MINUS 3.9%. And the rate has been negative for YEARS.
So, some of the most critical assumptions that drive Social Security’s long-term projections are completely wrong… meaning that the reality is probably worse than even they believe it to be.
And remember, they were already projecting that Social Security’s primary trust fund will run out of money in the early 2030s, just over a decade away.
There’s an even longer term problem with Social Security, though.
The birth rate of the United States has been in steady decline since the late 1980s. And for the last several years it has continued to hit fresh record lows.
This isn’t so much a problem now. But it creates an enormous problem 20-30 years from now.
A low birth rate means that there aren’t enough people being born who, decades from now, will be in the work force paying into the system.
Social Security needs a steady, growing work force, with an average of 3 workers paying into the system to support 1 retiree receiving benefits.
This is known as the worker-to-retiree ratio, and Social Security tracks this very closely.
3:1 is the break even level. It’s been well below that level for years, and is continuing to trend lower due to America’s declining birth rate.
And that doesn’t even take into consideration all the millions of jobs that will be lost in the coming decades due to automation, AI, and robotics.
The conclusions here are pretty obvious:
1) This problem is objectively enormous.
Public pensions around the world, from the US to Europe to Japan, are in deep financial trouble. And even private pensions are underfunded. The financial size of the problem completely dwarfs the other major issues of the day.
2) Tax hikes are inevitable, especially in the US.
The US right now is trying to model itself on the European welfare state. Well, payroll tax rates (i.e. taxes which fund public pensions) in places like France, Austria, Germany, etc. are DOUBLE what they are in the US.
So absolutely expect payroll tax rates in the Land of the Free to increase dramatically.
3) You have to take matters into your own hands.
The government isn’t going to fix this; they’ll continue to ignore the problem and make false promises because that’s the politically expedient thing to do.
There are plenty of solutions, but the bottom line is that you’ll have to set aside more money for retirement.
Use the tools at your disposal. Consider setting up, for example, a more robust, tax efficient retirement structure for qualifying income, like a solo 401(k).
This allows you to set aside more than $60,000 per year if you’re over the age of 50. Plus you’ll have more choices in the types of investments and speculations you can make, like real estate, cryptocurrency, royalties, and more.
No matter the structure, there’s hardly any downside in making sure that you have more money set aside for your retirement.
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And we wonder why the soon to be quadrillionaires want to kill off 40%? Investing in 401-Ks for anyone other than the under 40 is a joke. The market is so hopelessly overvalued that when the inflation shit hits the fan the stock market won’t know what hit it.
https://worldyturnings.blog/2021/06/15/the-big-lie-free-markets/
The only reason I’m in one is that my soon-to-be ex-employer matches contributions. As soon as I’m out of there, that 401-K will be pulled otherwise the market will just eat it.
Govt said: Social Security,
-it’s well funded as far as we can see
– it’s funded until 2080
-it’s funded into 2050
– it funded into 2030s
-that MFer is busted
Call me shocked…not
Covid cost the world $24 trillion?
That’s probably pocket change for this Rothschild’s Covid caper. Hmmmm? Dial 1-800-Rothschild for me.
What part of infinite money printing does Simon not understand?
Cost of “climate change”–zero…Cost of greedy corrupt politicians and their buddies–infinite.
Have you ever noticed that Socil Security is constantly in trouble……but there is always plenty of money for welfare.
And Nuevo Demorats
Not really,ss no big deal if the jab kills off the majority of those collecting/soon to be collecting.
FWIW the SS ‘old age and survivors’ benefit program can be rendered solvent without too much difficulty – assuming the US economy ever gets back to ‘normal’.
What will precipitate bad feelings and the passage of painful legislation is the Medicare/Medicaid programs, which currently are blank checks which get filled out every year for larger and larger amounts.
That which cannot go on forever, will stop.
Extrospective douche nozzles (bleeds leads: extro! extro! read all about it! – memorize it! – regurgitate it!) that go along get along take whatever is “offered” (the first one’s free, kid…), without any scrutiny, unlensed by prerogative at all, often as “their due,” deserve, a la Mencken, to “know what they want,” even if only subconsciously, or just one checkers move ahead, “& deserve to get it good & hard.”
Nobody in “healthcare” cartel helps anybody – but themselves. War is the health of the state, which never fails to claim care for the health of its conscripts & cannonfodder (who codependently enable, as masochists must)…
…including “social security”…
… and states are the warhammers of those that forge & weild them.
What the law of instrument says about hammers, & nails, falls on deaf hammers & dumb nails.
Thirty pieces of silver. Or even less. Or even much, much more – TBTF. It is all the same. The people involved, participating, are all the same…in the one way that paints by numbers the same picture over & over again. The process is the same: The always say die (for the “other” guy) dynamic is the same:: Because the insolvency insurgency precedes “the insolvency.” What you have to be before you can be an insolvent pole vaulter is – hello! – an insolvent pole vaulter.
Whether consciously, or not (mostly not), what’s inside gets projected outside. Actions are the dictionary, not words.
That emetic-excrementic action is then whitewash-expurgated with waxen words, silky stories, nozzled narratives – lies.
(z man wrote about storytime, recently. Tyrion the dwarf spoke of it, & what a great sell-story•sword “Bran the Broken” was going to be for to pacify & unify (pasteurize/homogenize) the conscripts.
Deceit is this weak species hallmark: there ain’t no free lunch but if thieves supplant homo-stolen with “gay-free,” viola! Like this gal’s “mindpower,” in The Devil’s Rejects (but the ending was worth the wade, & the freakriminals earned a little there):
This version, this sequence, this arrangement of words describing the perennial (not the prescient) darkbulb o’ original beezlebub/ble toil & trouble –– came out in 1943. But other assemblages saying the same obvious thing go all the way back. But, of course, see something say something to hammers & nails never fails to fail…if I was a carpenter, & you were a lady, would you marry me anyway? would you have my baby? yes. & hammers & press-on nails press on to beget, mostly, hammers & nails. ::
“There is naturally a genuine fear abounding lest the last token of active political right left to the modern slave – his right to vote – may also be abolished. It is a truism that every genuine officialdom is always out to destroy or at least to decrease the control of the nonexperts, of the parliaments or the congresses, & to render them powerless if an opportunity arises.**
**The specifically American problem of a transition from lay to expert rule lies in the fact that the primary justification for bureaucratic control is in the economic field. It is unnecessary to emphasize that there is a majority of fields of human endeavor & activity where a control from above would be completely out of place & constitute an unnecessary increase of state powers. Yet in America economics play such an important role, not because there is “more” economic activity (which is about the same proportionately per cent in every country because with the exception of beggars & millionaires’ sons everybody has to earn a livelihood), but because Americans attach such great importance to economic values. A bureaucratic control of economic life in a country where such great sentimental value is attached to the material aspects of life is – in a way – an attack against the central nerve of many an American, & the fear that total control may follow is thus not entirely unfounded. Economic control in the U.S. may be the equivalent to religious control in India, cultural control in Germany (the greatest present despair of Germans), or state control of sports & games in England! A control of private life or a control of the diet such as this free nation tolerated for half a generation in the form of the Volstead Act would be unthinkable in Fascist Italy. The only solution of the coming problem lies therefore in a metanoia, the methodical relegation of business & economics to a lower sphere of human consciousness.” (emphasis added to the punchline that is bludgeoning the rope-a-doped majority more undeniably than ever, now…). ~ The Menace of the Herd, or Procrustes at Large, by Erik Ritter von Kuehnelt-Leddinn