Social Security to Exhaust Funds in 2033

[Fern]

If the government did away with Social Security... people still wouldn't save for retirement. Then you would have all these retired people without a dime to their name needing assistance from the government.

I would like to have back my money going to SS... but we are going to be paying for dumb asses who don't save one way or another.

If people are so stupid they need the government to save for them... at least revert social security back to a contributory system... but at this point it is a little late for that.

There are many people who have savings insufficient for retirement, but not because they too stupid to save or preferred to buy 'rims' etc.

As a tax CPA for +30 years I have seen all types of people lose their assets, including retirement assets, for all types of reasons under many different scenarios.

Going back to 80's, and including 20000 and 2008, stock market crashes can virtually wipe out large saving accounts. This can, and has been, exacerbated by trading rules that favor large institutional investors over individuals and their IRA or 401(k) plans.

Then you've got examples like Enron and many others that went bankrupt. Typically, the employees, who have done nothing wrong, have much of their retirements assets tied up in the employing company's stock (favorable stock purchase plans etc.). Upon such bankruptcy much of their retirement assets are wiped out.

You've got people who become disabled or face major medical. Even if your HI covers the medical costs you cannot work and often retirement assets must be used to avoid the loss of a home or a pay a kid's college costs. Likewise for disabled people even if they collect disability insurance under the SS program.

You've got hard working, very successful people who are business owners. But in times like these (and others where the economy goes bad) draw upon their retirement assets to stave off business bankruptcy. Sometimes it works, sometimes it doesn't.

We had a case here where a crooked broker, or at least a monumentally incompetent one, lost the life savings of hundreds of retirees. The broker also went bankrupt so there is no recovery for these people. All they have now is SS. There are cases like this all the time, you only hear of the occasional Madoff type that makes the news.

There are many, many ways decent hard working people can find themselves victims of circumstances out of their control. Things that could not be reasonably foreseen. This is why we need a 'net'. This is why we have one.

SS was created in 1935 because many people, who had saved etc, were wiped out by the Great Depression. It was not their fault their life savings evaporated etc.

Fern

 

[werepossum]

It's very simple: Under Reagan, Social Security added an additional withdrawal (50% IIRC) to build a surplus aimed at keeping Social Security solvent for baby boomers.

That wasn't the first or last bad thing done with Social Security, but it was a major increase in the funds available for the government to borrow and spend.

Perhaps you don't understand what I was referring to - that 50% extra.

Wow, Craig can even condemn higher taxes if they are enacted by a Republican. I guess the <Makes government bigger?> branch occurs after the <Did a Republican do it?> branch in his extremely linear programming.

This is great news. We can now model Craig's entire reasoning on an 8080 and still have room for C/PM.

 

[werepossum]

There are many people who have savings insufficient for retirement, but not because they too stupid to save or preferred to buy 'rims' etc.

As a tax CPA for +30 years I have all types of people lose their assets, including retirement assets for all types of reasons under many different scenarios.

Going back to 80's, and including 20000 and 2008, stock market crashes can virtually wipe out large saving as accounts. This can, and has been, exacerbated by trading rules that favor large institutional investors over individuals and their IRA or 401(k) plans.

Then you've got examples like Enron and many others that went bankrupt. Typically, the employees, who have done nothing wrong, have much of their retirements assets tied in the employing company's stock (favorable stock purchase plans etc.). Upon such bankruptcy much of their retirement assets are wiped out.

You've got people who become disabled or face major medical. Even if your HI covers the medical costs you cannot work and often retirement assets must be used to avoid the loss of a home or a pay a kids college costs. Likewise for disabled people even if the collect disability insurance under the SS program.

You've got hard working very successful people who are business owners. But in times like these (and others where the economy goes bad) draw upon their retirement assets to stave off business bankruptcy. Sometimes it works, sometimes it doesn't.

We had a case here where a crooked broker, or at least monumentally incompetent, lost the life savings of hundreds of retirees. The broker also went bankrupt so there is no recovery for these people. All they have now is SS. There are cases like this all the time, you only hear of the occasional Madoff type that makes the news.

There are many, many ways decent hard working people can find themselves victims of circumstances out of their control. Things that could not be reasonably foreseen. This is we need a 'net'. This is why we have one.

SS was created in 1935 because many people, who had saved etc, were wiped out by the Great Depression. It was not their fault their life savings evaporated etc.

Fern

Well put.

I'm old enough to remember the county poor houses, although by that time they were simply boarding houses. I would not like to see them rebuilt and filled again.

 

[hal2kilo]

There are many people who have savings insufficient for retirement, but not because they too stupid to save or preferred to buy 'rims' etc.

As a tax CPA for +30 years I have all types of people lose their assets, including retirement assets for all types of reasons under many different scenarios.

Going back to 80's, and including 20000 and 2008, stock market crashes can virtually wipe out large saving as accounts. This can, and has been, exacerbated by trading rules that favor large institutional investors over individuals and their IRA or 401(k) plans.

Then you've got examples like Enron and many others that went bankrupt. Typically, the employees, who have done nothing wrong, have much of their retirements assets tied in the employing company's stock (favorable stock purchase plans etc.). Upon such bankruptcy much of their retirement assets are wiped out.

You've got people who become disabled or face major medical. Even if your HI covers the medical costs you cannot work and often retirement assets must be used to avoid the loss of a home or a pay a kids college costs. Likewise for disabled people even if the collect disability insurance under the SS program.

You've got hard working very successful people who are business owners. But in times like these (and others where the economy goes bad) draw upon their retirement assets to stave off business bankruptcy. Sometimes it works, sometimes it doesn't.

We had a case here where a crooked broker, or at least monumentally incompetent, lost the life savings of hundreds of retirees. The broker also went bankrupt so there is no recovery for these people. All they have now is SS. There are cases like this all the time, you only hear of the occasional Madoff type that makes the news.

There are many, many ways decent hard working people can find themselves victims of circumstances out of their control. Things that could not be reasonably foreseen. This is we need a 'net'. This is why we have one.

SS was created in 1935 because many people, who had saved etc, were wiped out by the Great Depression. It was not their fault their life savings evaporated etc.

Fern

Wow, how unFern of you. Good post.

 

[First]

Wow, how unFern of you. Good post.

lol. +1.

 

[Franz316]

The boomers are hoping to get through the gates before it all comes crashing down behind them. All they need to do is kick the can down the road for a few more years, and since they are the ones in power they have the means to do so.

 

[werepossum]

Wow, how unFern of you. Good post.

WTF? Fern's one of the sharpest, clearest thinking people on the forum. This is hardly an unusual post for him.

 

[Zebo]

Yes it is sad that people are so stupid that the government has to think and do for them. If an 18 year started investing right out of high school and put $100/month towards retirement until age 60... that person would not need social security.

But there is always that shiny new camaro, the latest iphone, ipad, satellite TV, the McMansion, etc etc that prevents many people from saving for the future.

If life were only that simple. There is always divorces. Lawsuits. Unforseen medical catastrophes. Never making much money. MH globals who disappear with your money. etc etc etc.

SS is a good program and only resort for many. Just needs to be means tested is all to keep it solvent.

Oh and if you think that $100 a month savings will do you any good when banks fail, as they should have, look back to 1930's where peoples savings were gone.

 

[Craig234]

Wow, how unFern of you. Good post.

He's made a couple good ones lately, credit where it's due.

 

[xBiffx]

I'm a bit confused on the comments on Fern's latest post. Damn near every post from him is intelligent, well thought out, clear and down right honest. This latest is not at all different. Seems to me some people have been living in a cave.

Fern :thumbsup:

Cave dwellers :thumbsdown:

 

[BoomerD]

There are many people who have savings insufficient for retirement, but not because they too stupid to save or preferred to buy 'rims' etc.

As a tax CPA for +30 years I have seen all types of people lose their assets, including retirement assets, for all types of reasons under many different scenarios.

Going back to 80's, and including 20000 and 2008, stock market crashes can virtually wipe out large saving accounts. This can, and has been, exacerbated by trading rules that favor large institutional investors over individuals and their IRA or 401(k) plans.

Then you've got examples like Enron and many others that went bankrupt. Typically, the employees, who have done nothing wrong, have much of their retirements assets tied up in the employing company's stock (favorable stock purchase plans etc.). Upon such bankruptcy much of their retirement assets are wiped out.

You've got people who become disabled or face major medical. Even if your HI covers the medical costs you cannot work and often retirement assets must be used to avoid the loss of a home or a pay a kid's college costs. Likewise for disabled people even if they collect disability insurance under the SS program.

You've got hard working, very successful people who are business owners. But in times like these (and others where the economy goes bad) draw upon their retirement assets to stave off business bankruptcy. Sometimes it works, sometimes it doesn't.

We had a case here where a crooked broker, or at least a monumentally incompetent one, lost the life savings of hundreds of retirees. The broker also went bankrupt so there is no recovery for these people. All they have now is SS. There are cases like this all the time, you only hear of the occasional Madoff type that makes the news.

There are many, many ways decent hard working people can find themselves victims of circumstances out of their control. Things that could not be reasonably foreseen. This is why we need a 'net'. This is why we have one.

SS was created in 1935 because many people, who had saved etc, were wiped out by the Great Depression. It was not their fault their life savings evaporated etc.

Fern

Whoa...while Fern and I tend to be on opposite sides of most things, I don't usually consider him to be one of the whackos on these boards...and this post proves that I'm right.

Well said. :thumbsup:

As for Social Security being broke...not quite...

http://finance.yahoo.com/news/social-security-really-exhausted-not-175539433.html

Is Social Security really "exhausted?" Not at all

CHICAGO (Reuters) - It's rare to see a federal official publicly beg reporters to get a story right, but the commissioner of the Social Security Administration seemed ready to get down on his hands and knees at a Monday press briefing. Michael Astrue was cautioning journalists not to scare the public about the meaning of the word "exhaustion."

"Please, please remember that exhaustion is an actuarial term of art and it does not mean there will be no money left to pay any benefits" he warned in issuing the trustees' annual report on the financial health of the Social Security program.

"After 2033, even if Congress does nothing, there will still be sufficient assets (from payroll taxes) to pay about 75 percent of benefits. That's not acceptable, but it's still a fact that there will still be substantial assets there," Astrue insisted.

This year's report shows some acceleration of the drawdown of Social Security's vast trust fund reserves. Absent Congressional action, the trust funds of the retirement and disability programs are expected to be exhausted in 2033 as baby-boomer retirements accelerate - three years sooner than projected a year ago.

But Astrue went out of his way to emphasize that the program is far from broke. Social Security took in $69 billion more than it spent last year, according to the report, when you include tax receipts and interest on bonds held in the Social Security Trust Fund (SSTF). The SSTF had reserves of $2.7 trillion last year.

Yet the press plowed right ahead with stories warning that the Social Security retirement program is running out of money. "There won't be much money left for you" after 2033, warned a public radio reporter - a line that pretty well summed up the coverage and nearly forced me to run my car into a ditch.

Americans need to get this right, because Social Security is the primary source of retirement security for most Americans -- and it will be even more important in the future as we continue to dig our way out of the rubble of the Great Recession.

So, what's really going on with Social Security?

1. Social Security isn't running out of money.

The long-range actuarial shortfall is projected to be 2.67 percent of taxable payroll - in other words, 2.67 percent of all the earnings subject to Social Security contributions. That's a modest shortfall - and it fluctuates over time due to economic cycles and changes in assumptions about growth in taxable earnings. For example, the projected year of SSTF exhaustion was as far off as 2042 in 2003 in the wake of the dot-com bubble; it was as close as 2029 in 1994 due to changed expectations about real wage gains.

2. Yes Virginia, there is a Trust Fund.

Social Security's critics love to argue that the SSTF is a myth, but it's not. Although Social Security was designed as a pay-as-you-go program, every penny it receives is credited to the SSTF, which has been building enormous reserves following benefit cuts enacted in 1983.

The Trustee report confirms - again - that the surplus funds are invested in "special issue Treasury bonds" and that they are "full faith and credit" obligations of the government to Social Security. Since Social Security can't borrow money by law, it uses those reserves to pay benefits whenever cash on hand runs short.

3. This year's news is not about our aging population.

The accelerated SSTF exhaustion date stems from two factors: a 1.6 percent drop in taxable earnings due to the ongoing depressed economy, and a 3.6 percent cost-of-living adjustment awarded for this year.

Our aging demographics do play a role in the longer range imbalance after 2033, because we have not raised revenue sufficient to match the projected growth in our retired population.

"The choice is to either reduce benefits 25 percent, or raise revenues 33 percent to adapt," says Steve Goss, chief actuary of the Social Security Administration. Making reforms sooner rather than later would allow for a more gradual phase-in, giving the public plenty of time to plan and adjust accordingly.

I'm in favor of a modest, graduated payroll tax increase. Social Security benefits are modest, averaging $1,230 per month this year. It's the main source of income for most people over age 65 - more than half for nearly one in two married couples and two in three unmarried individuals, according to the National Academy of Social Insurance.

A gradual increase in payroll taxes over the next decade would eliminate a sizable portion of the imbalance; another approach is to lift or remove entirely the cap on wages subject to payroll taxes, which currently is set at $110,100.

Perhaps that won't be too exhausting an idea for Congress and the media to embrace.

(The writer is a Reuters columnist. The opinions expressed are his own.)

 

[IronWing]

I am confident that SS will pay out every dime promised indefinitely. No 75% of benefits, no default. The reason for my confidence is quite simple. The SS cost of living adjustments have been systematically gutting benefits since at least the early 1970s and can be expected to do so into the future. As long as the actual rate of inflation continues to outstrip the inflation rate used by the SSA to calculate cost of living adjustments to benefits the financial condition of the SS trust fund will only get better. You'll get every dime. The dimes won't be worth much but you'll get them.

To folks mad about Congress "raiding" SS funds, what alternatives would you propose the funds be invested? If the funds go in a "lock box" where they are not invested but basically shoved under a mattress there are two effects: the first is that no interest would be earned as the money wouldn't be "working" and the second is that a huge chunk of liquidity is removed from the financial system. Having the SS Administrator select private sector investment options is another idea but how would folks feel about the SS fund being the single largest investor in the private equities markets, sort of CALPRS on steroids? Something like the federal employees' TSP fund (similar to a 401k) where workers can select from a few mutual fund type investments might work I suppose. But that moves away from the insurance aspect (and intent) of the SS system as workers who invest poorly suffer in retirement and the SS system as a whole would be heavily impacted by broad market swings.

 

[bononos]

SS is under some strain though not to the extent that the people who cry ponzi scheme believe (same people who believe fiat money is counterfeiting). I see the overall problem stemming from demographics and to an extent - the wealthy could pay more (since the ss tax is capped).

There is are less working folk to support the retirees because demographics have shifted. America or any other country can't possibly sustain a pyramid age structure diagram continuously as it isn't ecologically sustainable. There needs to be a one-time adjustment in ss contributions to reflect an aging population and the problem would be sort of fixed.

 

[hal2kilo]

I'm a bit confused on the comments on Fern's latest post. Damn near every post from him is intelligent, well thought out, clear and down right honest. This latest is not at all different. Seems to me some people have been living in a cave.

Fern :thumbsup:

Cave dwellers :thumbsdown:

Fern is always clear and concise. Just wrong (most of the time IMO).

 

[Craig234]

SS is under some strain though not to the extent that the people who cry ponzi scheme believe (same people who believe fiat money is counterfeiting). I see the overall problem stemming from demographics and to an extent - the wealthy could pay more (since the ss tax is capped).

There is are less working folk to support the retirees because demographics have shifted. America or any other country can't possibly sustain a pyramid age structure diagram continuously as it isn't ecologically sustainable. There needs to be a one-time adjustment in ss contributions to reflect an aging population and the problem would be sort of fixed.

Enemies of Social Security have three motivations, if they're not just ignorant:

1. Destroy Social Security as a policy benefiting Democrats politically (they get credit)

2. Privatize Social Security to give massive profits to the financial industry

3. Ideology, just in general hating programs 'for the people' - shift wealth to the top

The things they say to attack SS are different - whatever will fool people, 'you're a sucker, it won't pay you anything, you should supporting getting rid of it'

 

[Exterous]

Going back to 80's, and including 20000 and 2008

Shit - I gotta make sure my money is out of the market before the great crash of 20,000AD hits!

Enemies of Social Security have three motivations, if they're not just ignorant
(snip)

I don't think its necessarily an ignorance of the program itself but ignorance in regards to how Americans save or rather how many Americans dont save for retirement. The majority of Americans are just not saving enough. And before someone says 'Well, thats their fault and therefore their problem' they need to realize that if all those people have no safety net it will become your problem

I think we need to do a great many things to deal with the retirement savings issue (required grade school finance classes for one) but comepletely getting rid of SS is not one of them