Social Security

R

Rigby5

Member
Someone forwarded me this message about Social Security, and I thought it was interesting/scary.

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So if you know me you know that I have strong opinions on social security.
I believe anyone who has contributed should be aware of the slippery slope renaming this program will lead…
I do not like this renaming term myself.
My contributions were made for over my career and continue to make on every salary I received. In the beginning it may not have always been the work I wanted to be doing at the time BUT I always had a job, and sometimes more than one to make ends meet.
The Social Security check is now (or soon will be) referred to as a "Federal Benefit Payment?" I'll be part of the one percent to forward this.
I am forwarding it because it touches a nerve in me, and I hope it will in you.
Please keep passing it on until everyone in our country has read it.
The government is now referring to our Social Security checks as a "Federal Benefit Payment."
This isn't a benefit.
It is our money paid out of our earned income!
Not only did we all contribute to Social Security but our employers did too. It totaled 15% of our income before taxes.
If you averaged $30K per year over your working life, that's close to $180,000 invested in Social Security.
If you calculate the future value of your monthly investment in social security ($375/month, including both you and your employers contributions) at a meager 1% interest rate compounded monthly, after 40 years of working you'd have more than $1.3+ million dollars saved!
This is your personal investment.
Upon retirement, if you took out only 3% per year, you'd receive $39,318 per year, or $3,277 per month.
That's almost three times more than today's average Social Security benefit of $1,230 per month, according to the Social Security Administration. (Google it – it’s a fact).
And your retirement fund would last more than 33 years (until you're 98 if you retire at age 65)! I can only imagine how much better most average-income people could live in retirement if our government had just invested our money in low-risk interest-earning accounts.
Instead, the folks in Washington pulled off a bigger "Ponzi scheme" than Bernie Madoff ever did.
They took our money and used it elsewhere. They forgot (oh yes, they knew) that it was OUR money they were taking.
They didn't have a referendum to ask us if we wanted to lend the money to them. And they didn't pay interest on the debt they assumed.
And recently they've told us that the money won't support us for very much longer.
But is it our fault they misused our investments? And now, to add insult to injury, they're calling it a "benefit", as if we never worked to earn every penny of it.
Just because they borrowed the money doesn't mean that our investments were a charity!
Let's take a stand. We have earned our right to Social Security and Medicare.
Demand that our legislators bring some sense into our government.
Find a way to keep Social Security and Medicare going for the sake of that 92% of our population who need it.
Then call it what it is: Our Earned Retirement Income.
99% of people won't Cut and Paste this to their timelines. Will you?
Please, for the sake of our country, Copy & Paste. It's important.
...}
 
Rigby5 said:
Find a way to keep Social Security and Medicare going for the sake of that 92% of our population who need it.
Click to expand...
The "funding shortfall" (i.e., the amount by which the promised benefits under the programs exceed the actual value of the funds held) for Social Security and Medicare is something like $150 Trillion (yes that's with a "T"). This article dates to 2009 and the situation has only become worse since then.

knowledge.wharton.upenn.edu

Social Security and Medicare: Trying to Tackle Two 800-pound Gorillas

While many people worry about the billions of dollars spent bailing out banks, auto makers and other sectors, shortfalls in Medicare and Social Security are what could ultimately sink efforts to revive the U.S. economy. As 78 million baby boomers begin to retire, funding for the government's two...
knowledge.wharton.upenn.edu knowledge.wharton.upenn.edu

But a few comments:

Social Security is what the actuaries call a "PAYGO" (Pay As You Go). That is the taxes you're paying today are being used to pay the benefits of current retirees. When you retire your benefits will be paid by the taxes paid by your children, your grandchildren, and your great grandchildren. If you live long enough it may be taxes paid by your great great grandchildren. [Pension liabilities are extremely "long tailed" - the last widow of a US Civil War veteran died in 2008 and the last surviving child of a Civil War veteran died in 2020. I remember when I first had to study Social Security (early 80's) and there were 180 widows and orphans of Civil War vets who were still collecting pensions.]

BTW, that $150 Trillion number does not include the funding shortfalls for any number of state and local pensions - we've already seen municipalities declare bankruptcy to get out from under their existing pension liabilities.

They took our money and used it elsewhere. They forgot (oh yes, they knew) that it was OUR money they were taking.
They didn't have a referendum to ask us if we wanted to lend the money to them. And they didn't pay interest on the debt they assumed.
Click to expand...
Wrong.

What did you expect them to do with the monies collected? Stuff them into a mattress somewhere? The funds are invested in interest bearing special issue US government bonds. Given the long tail nature of pension liabilities there's nothing else they can do - after all, what corporate securities are available in sufficient quantity and MORE IMPORTANTLY are financially solid enough to guarantee that they'll still be collectible in a hundred years or so?

Find a way to keep Social Security and Medicare going for the sake of that 92% of our population who need it.
Click to expand...
There are only three possible approaches: (i) drastically cut benefits, (ii) substantially increase payroll taxes, (iii) increase the retirement age - of some combination of the three.

You might want to read this

actuary.org

Social Security Challenge - Actuary.org

actuary.org actuary.org

One thing to note - the 75 year funding horizon mentioned here does not encompass the total liabilities of the system - it's just a common way of simplifying calculations by assuming that everything after that is "hunky-dory".

Note - that link includes excerpts from the Social Security Trustees report. There is a separate report issued by the Medicare Trustees.
 
sear said:
Horrendous idea from the start!

If it weren't a pyramid scam it might be salvageable. Conceptually it's an atrocity.

Governments should regulate, not administer.
Click to expand...


I disagree.
If not for the government being able to borrow the Social Security surplus interest free for the last century, the country would be bankrupt from the National Debt interest.
Social Security finances the whole government since the money is paid in 50 years before pay outs.
 
Shiftless2 said:
The "funding shortfall" (i.e., the amount by which the promised benefits under the programs exceed the actual value of the funds held) for Social Security and Medicare is something like $150 Trillion (yes that's with a "T"). This article dates to 2009 and the situation has only become worse since then.

knowledge.wharton.upenn.edu

Social Security and Medicare: Trying to Tackle Two 800-pound Gorillas

While many people worry about the billions of dollars spent bailing out banks, auto makers and other sectors, shortfalls in Medicare and Social Security are what could ultimately sink efforts to revive the U.S. economy. As 78 million baby boomers begin to retire, funding for the government's two...
knowledge.wharton.upenn.edu knowledge.wharton.upenn.edu

But a few comments:

Social Security is what the actuaries call a "PAYGO" (Pay As You Go). That is the taxes you're paying today are being used to pay the benefits of current retirees. When you retire your benefits will be paid by the taxes paid by your children, your grandchildren, and your great grandchildren. If you live long enough it may be taxes paid by your great great grandchildren. [Pension liabilities are extremely "long tailed" - the last widow of a US Civil War veteran died in 2008 and the last surviving child of a Civil War veteran died in 2020. I remember when I first had to study Social Security (early 80's) and there were 180 widows and orphans of Civil War vets who were still collecting pensions.]

BTW, that $150 Trillion number does not include the funding shortfalls for any number of state and local pensions - we've already seen municipalities declare bankruptcy to get out from under their existing pension liabilities.


Wrong.

What did you expect them to do with the monies collected? Stuff them into a mattress somewhere? The funds are invested in interest bearing special issue US government bonds. Given the long tail nature of pension liabilities there's nothing else they can do - after all, what corporate securities are available in sufficient quantity and MORE IMPORTANTLY are financially solid enough to guarantee that they'll still be collectible in a hundred years or so?


There are only three possible approaches: (i) drastically cut benefits, (ii) substantially increase payroll taxes, (iii) increase the retirement age - of some combination of the three.

You might want to read this

actuary.org

Social Security Challenge - Actuary.org

actuary.org actuary.org

One thing to note - the 75 year funding horizon mentioned here does not encompass the total liabilities of the system - it's just a common way of simplifying calculations by assuming that everything after that is "hunky-dory".

Note - that link includes excerpts from the Social Security Trustees report. There is a separate report issued by the Medicare Trustees.
Click to expand...

I disagree.
The Social Security short fall was tiny until around 2020, and will go away by 2040.
And in the mean time, the Social Security surplus has saved the government trillions.
You pay in 50 years before payouts, so the government gets to use this money for 50 years, without interest.
Technically a slight 3% interest is paid, but since it is not compounding, it actually is something like 0.005% interest if it compounded like it should.

Social Security is the most beneficial and cost savings thing this country has ever done.
It prevents most of our national debt from being held by foreign countries.
We save trillions in interest.
 
Shiftless2 said:
What part of the term "interest bearing" don't you understand??
Click to expand...

When you invest in something that is "interest bearing", it compounds annually, where the next year pays interest on the previous interest as well as the principle.
Social Security does not do that.
It pays very little interest, and it does not matter how long the money sat in there.
Social Security is not compounding.
It does not matter how long you have the money in there.
The pay is tiny compared to if you were to put it in a compounding investment.

{...

How does an interest-bearing account work?​

Typically, an interest-bearing account pays interest monthly. The interest rate may fluctuate based on the market or the bank. Interest is paid as a percentage of your balance, so the amount you earn depends on the size of your bank balance. An account with a balance of $5,000 will earn more interest than an account with $50 even if the interest rate is the same.

The amount of interest your account can earn is called the annual percentage yield, also known as APY. APY refers to the total percentage your account earns and how frequently that interest compounds. Interest may be compounded daily, monthly or quarterly.

Say you open a savings account with a 3.00% APY. The account compounds daily, and you deposit $500 into it. After one year, if you don't make any additional deposits to your account, you'll have $515.23.

How does compounding interest work?​

Wait a second, 3.00% of $500 is $15, so where did that extra 23 cents come from? That's compound interest or having the interest on your account earn interest. If your account compounds interest, and most do, your money works even harder for you because the interest also starts to yield a return.

...}
 
You really have to learn something about finance - not all interest bearing securities have annual coupons - look up "zero coupon bonds". Fact is, the first investment I ever made in the market was to buy bunch of 30 year treasury strips (google that) when interest rates were high - when rates fell I sold them - basically doubled my money in slightly over a year.
 
Shiftless2 said:
You really have to learn something about finance - not all interest bearing securities have annual coupons - look up "zero coupon bonds". Fact is, the first investment I ever made in the market was to buy bunch of 30 year treasury strips (google that) when interest rates were high - when rates fell I sold them - basically doubled my money in slightly over a year.
Click to expand...

Usually bonds have a maturity date, with a penalty for early withdraw.
But the interest paid by Social Security does not even keep up with inflation.
 
 
Shiftless2 said:
Did you read the Trustee's report? And do you understand the assumptions and models underlying it?
Click to expand...

All the Social Security trustee report is saying is that by 2034 there will be a shortfall in pay outs, which the government is obligated to fix by subsidizing with some payback for all the interest the feds have saved over the decades of borrowing the SS surplus.

{...
The 2025 Social Security Trustee Report indicates that the combined trust funds will be depleted by 2034, leading to a potential 23% cut in benefits unless reforms are enacted.

Key​

  1. Projected Depletion Date: The report estimates that the combined Old-Age and Survivors Insurance (OASI) and Disability Insurance (DI) trust fund reserves will be depleted by 2034, one year earlier than previously projected. After this date, Social Security could still pay about 81% of scheduled benefits using tax income alone.
    https://www.bing.com/ck/a?!&&p=01f0...0LXNob3dzLWFib3V0LXNvY2lhbC1zZWN1cml0eQ&ntb=1
  2. Financial Status: The long-term outlook for the Social Security trust funds has slightly declined. The actuarial deficit is projected to average 3.82% of taxable payroll over the next 75 years, indicating that costs will exceed revenues[^^5^^].
    https://www.bing.com/ck/a?!&&p=9b20...y9JRi9QREYvSUYxMzA0NS9JRjEzMDQ1LjUucGRm&ntb=1
  3. Impact of Aging Population: The report highlights that rising costs are primarily driven by the aging population, with the ratio of beneficiaries to covered workers projected to increase. This trend suggests that program costs will grow faster than revenues.
    https://www.bing.com/ck/a?!&&p=9b20...y9JRi9QREYvSUYxMzA0NS9JRjEzMDQ1LjUucGRm&ntb=1
  4. Policy Recommendations: The trustees emphasize the need for timely reforms to avoid abrupt changes to benefits or taxes. They suggest that implementing changes sooner would allow for a more gradual adjustment for workers and beneficiaries[^^5^^].
    https://www.bing.com/ck/a?!&&p=9b20...y9JRi9QREYvSUYxMzA0NS9JRjEzMDQ1LjUucGRm&ntb=1
  5. [URL='https://www.bing.com/ck/a?!&&p=9b20697a04dd4347503a0438b889c77773c80538371225ec7de0d1f1358d0b64JmltdHM9MTc2ODAwMzIwMA&ptn=3&ver=2&hsh=4&fclid=36f624a8-ebe9-65c7-29d9-3235ea67644e&psq=social+security+trustee+report+2025&u=a1aHR0cHM6Ly93d3cuY29uZ3Jlc3MuZ292L2Nyc19leHRlcm5hbF9wcm9kdWN0cy9JRi9QREYvSUYxMzA0NS9JRjEzMDQ1LjUucGRm&ntb=1']Current Benefits: As of 2025, Social Security covers approximately 185 million workers and provides monthly cash benefits to over 69 million beneficiaries, making it the largest federal program in terms of both the number of people affected and its financial scope.


    [/URL]
 
sear said:
Too technickel.

"When your outgo exceeds your income,
the upshot will be your downfall." Paul Harvey
Click to expand...

That is only true over a long period of time.
The shortfall will be less than 10 years, and the amount is far less than what has been gained by being able to borrow the SS surplus all these decades.
 
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