Tag Archives: Social Security

The Social Security Fiscal Black Hole Has Arrived, by Andrew Moran

The fiscal doomsday so many of us have warned about for so long is at our doorstep. From Andrew Moran at libertynation.com:

The fiscal black hole surrounding Social Security and Medicare had been talked about long before mankind got its first glimpse of the interstellar phenomenon. Like the particles and electromagnetic radiation absorbed in the galactic monster’s path, the American people face an event horizon, a point of no return. Unless drastic actions are taken by good folks in the swamp, the only hope for the next generation of retirees is that scientists discover a wormhole connecting this reality with an alternative universe that practices prudence and responsibility.

Social Insecurity And Medican’t

According to the Social Security Administration’s trustee report, the cost of maintaining this entitlement program will exceed the revenue it generates next year. The last time this happened was in 1982.

Last year, SS received $1.003 trillion in income, including $885 billion from the payroll tax, $83 billion in interest, and $35 billion from taxing benefits. At the same time, it spent about $1 trillion: $988.6 billion on benefits, $6.7 billion on administration, and $4.9 billion on retirement expenses.

With the 1.8% cost-of-living adjustment (COLA) later this year, SS expenses will exceed the money it receives. Based on current trends, SS will exhaust its reserves by 2035 and officially be insolvent. The other disappointing takeaway is that the projected bankruptcy date is one year sooner than previous estimates.

Medicare also faces a gaping budget hole. The overseers of this government benefit say it is slated for bankruptcy by 2026. This would result in hospitals, nursing homes, and other medical care providers receiving only a portion of their payments.

It isn’t all bad news. Social Security’s disability program is expected to remain in the black for an extra 20 years to 2052.

Continue reading

Advertisements

Unlike Real Insurance, Social Security “Insurance” Creates Greater Risk for the Future, by Gary Galles

Social Security is not insurance. From Gary Galles at mises.org:

Every time the Social Security trustees issue their annual report, some people notice that the system’s huge unfunded liabilities (currently, a $42.1 trillion cumulative shortfall) are inherently unfair to future Americans. That threatens its status as the “third rail” of politics, which electrocutes anyone who tries to touch it.

So Social Security’s army of defenders go on the attack. And one of their greatest weapons is that the program has been promoted as insurance program ever since it started and taking away insurance sounds like a bad idea.

In a sense, Social Security does act as a form of mandatory old age insurance for participants. However, rather than paying off with earnings from investments, as with private insurance, its taxes provide only promised future government benefits (though the Supreme Court long ago ruled in favor of the government’s claim that it did not need to provide the benefits promised).

However, for Social Security to really be insurance, a group’s “premiums” would have to finance the benefits they receive. But that has not even remotely been true of Social Security. Older generations got far more in benefits than they paid. They may believe they deserve a massively subsidized deal (especially when it is falsely presented as if early recipients actually paid all the costs of their benefits), but that deal is dramatically unfair to younger generations forced to pick up the multi-trillion dollar bill to make good on program promises.

Continue reading

Just released: Social Security earned a pitiful 2.8% on your money last year, by Simon Black

Social Security is broke and next year expenses will exceed revenues. Medicare is broke, too. From Simon Black at sovereignman.com:

Hot off the presses: The Board of Trustees for the Social Security and Medicare programs in the United States just released their annual report a few minutes ago.

And if you want to read all of its gory detail, check it out for yourself here.

Both of these programs are massively and terminally underfunded. And not by a little bit.

The Board of Trustees itself calculates Social Security’s long-term shortfall at a mind boggling $43+ TRILLION.

Simply put, the trust funds don’t have enough money to keep the programs going, at least under the current promises.

They admit right at the beginning of their report that, starting 2020, Social Security’s cost will exceed the money it earns in from interest and taxes.

That’s not some far out date decades into the future. That’s next year. And every year after that.

By 2034, just 15 years from now, Social Security’s primary trust fund will be fully depleted. And one of Medicare’s trust funds will run out of money in 2026.

Continue reading

Social Security Fails, by John Stossel

Within most of our lifetimes, on present course Social Security will be unable to meet its obligations. From John Stossel at theburningplatform.com:

Social Security is running out of money.

You may not believe that, but it’s a fact.

That FICA money taken from your paycheck was not saved for you in a “trust fund.” Politicians misled us. They spent every penny the moment it came in.

This started as soon as they created Social Security. They assumed that FICA payments from young workers would cover the cost of sending checks to older people. After all, at the time, most Americans died before they reached 65.

Now, however, people keep living longer. There just aren’t enough young people to cover my Social Security checks.

So Social Security is going broke. This year, the program went into the red for the first time.

Presidents routinely promise to fix this problem.

George W. Bush said he’d “strengthen and save” Social Security. Barack Obama said he’d “safeguard” it, and Donald Trump said that he’ll “save” it.

But none has done anything to save it.

“There is a plan out there to save it, but it requires some tough choices,” says Heritage Foundation budget analyst Romina Boccia.

Heritage proposes cutting payments to rich people and raising the retirement age to 70.

Good luck with that. Seniors vote. Most vote against politicians who suggest cutting benefits.

This summer, interviewing people for my new video about Social Security’s coming bankruptcy, was the first time I had heard the majority of such a group say they were aware there is a problem. One said, “We’re already at a trillion dollars (deficit) … (I)t’s almost like a big Ponzi scheme.”

Actually, more like a pyramid scheme. Ponzi schemes secretly take your money. But the Social Security trick is written into the law — there for anyone who bothers to look.

Social Security isn’t the only hard choice ahead of us. Medicare will run out of money in just eight years. At that point, benefits will automatically be cut. Social Security hits its wall in 15 years.

Amazingly, as we approach this disaster, Democrats say — spend even more.

To continue reading: Social Security Fails

Is Social Security Worth Its Cost? by Kevin Dayaratna, Rachel Greszler and Patrick Tyrrell

In sometimes excrutiating detail this Heritage Foundation report demonstrates why, for many Americans, Social Security will be worth nowhere near what it costs them. From Kevin Dayaratna, Rachel Greszler and Patrick Tyrrell at heritage.org:

SUMMARY

Americans would be better off keeping their payroll tax contributions and saving them in private retirement accounts than having to contribute to the government’s broken Social Security system. Social Security’s design has, over the decades, presumed that many Americans are too incompetent to make informed decisions for themselves, but few Americans believe that the government knows better than they do what is best for them and their families. Moreover, Social Security’s financial structure effectively guarantees that workers will receive extremely low—or even negative returns—on their payroll taxes.

KEY TAKEAWAYS

This report compares what Social Security can provide and what workers could receive if they had ownership of their Social Security payroll taxes.

This information can help individuals of all ages understand what they can expect to receive from Social Security or from private savings.

Virtually all Americans would be better off keeping their payroll taxes and saving them in private retirement accounts.

Select a Section 1/0

Social Security began as an anti-poverty insurance program, aimed at preventing workers from outliving their savings when they were no longer physically able to work. As such, Social Security was limited in nature, beginning as only a 2 percent payroll tax—and promising to never take more than 6 percent of workers’ pay. Today, Social Security’s Old Age and Survivors Insurance (OASI) retirement program takes 10.6 percent of workers’ pay, and its Disability Insurance (DI) program takes another 1.8 percent, for a combined total of 12.4 percent. This is more than most Americans pay in income taxes.

As Social Security has grown in size and scope, it has become more than just an insurance and poverty prevention program—and with millions of seniors living below the federal poverty line, it is not doing a great job even at that. Having reduced the incentive to save for retirement, Social Security now represents a significant portion of most workers’ retirement savings. Despite the fact that Social Security was intended to be an insurance program, providing a secure retirement income, individuals have no legal claim to their scheduled Social Security benefits, as the program can only pay out as much money as it has on hand and Congress can change benefit levels if it wants. Not surprisingly, more than 60 percent of workers under the age of 50 do not think Social Security will be able to pay them a benefit when they retire.

To continue reading: Is Social Security Worth Its Cost?

Opinion: The next bear market in stocks will spark a retirement crisis, by Howard Gold

A bear market in stocks would substantially reduce the Baby Boomers’ already inadequate savings. From Howard Gold at marketwatch.com:

A recession could decimate even substantial retirement portfolios, and Social Security and Medicare are facing shortfalls
AFP/Getty Images

Almost lost amid the torrent of recent news was a sobering item that will surely have far-reaching consequences.

The U.S. government announced that for the first time since 1982, it is tapping into Social Security trust funds to pay current benefits to recipients and it is dipping into Medicare’s reserves to cover the costs of that program.

The trustees also projected that the trust fund will run out of money by 2034 and that Medicare’s fund for paying costly hospital bills will be depleted by 2026.

That may ultimately force a cowardly Congress to cut benefits, raise taxes, increase the eligibility age, or some combination of the three. For the 52% of Americans who rely on Social Security for more than half their retirement income and the 25% of retirees who get more than 90% of their income from the program, that would be a disaster.

Read: Fixing Social Security starts with us, the voters

But the 10,000 baby boomers who will turn 65 every single day from now until 2029 face an even broader retirement crisis that could cause big social and political fallout.

Over the next few years, we will almost surely confront a bear market and recession that could decimate even substantial retirement portfolios, not to mention financially dicey state and local pension plans and the federal government itself. And those governments will have few tools to fight it. Consider:

• We are in the 10th year of an economic recovery and bull market in stocks. The S&P 500 index SPX, -0.86%   has more than quadrupled from its March 2009 bottom, for a compound annual growth rate of 17.5% during that time. Since the S&P 500 has averaged a 10% annual gain over the past 89 years, at some point there has to be a reversion to the mean.

It’s official: Medicare trust fund will run out of money in 8 years, by Simon Black

Don’t worry, the soon to be broke Medicare and Social Security funds will be backstopped by an insolvent government. From Simon Black at sovereignman.com:

Two days ago the respective Boards of Trustees for Medicare and Social Security released their annual reports for 2018.

As usual, the numbers are pretty gruesome… and the reports plainly stated what we’ve been talking about for years: the trust funds for both Social Security and Medicare are going to run out of money.

Soon.

In the case of Medicare, the Trustees project that its largest trust fund will be fully depleted in 2026, just eight years away. In the context of retirement, that’s right around the corner.

For Social Security, the Trustee report stated that the program will spend more money on benefits in 2018 than it will generate in income and tax revenue.

So this year will be the first time Social Security has run a deficit since 1982.

But it gets worse. Because according to the Trustees’ projections, the program will continue running larger and larger deficits until it too becomes fully depleted in 2034.

After that, recipients can expect at least a 25% cut in the benefits that they were promised and worked their entire lives to receive.

Again, these numbers come directly from the Trustees of Social Security and Medicare (which includes the US Treasury Secretary).

The reports were so dire that mainstream publications picked them up almost immediately.

Curiously, though, a number of newspapers tried to play down the bad news, dismissively telling their readers that Social Security and Medicare are just fine, and that those sobering projections don’t matter.

These are common refrains. They’ll state, for example, that there’s nothing to worry about because the government will step in and bail out the programs.

Is that so? Well, who is going to bail out the government?

According to the Treasury Department’s annual financial report, Uncle Sam is already insolvent to the tune of $20.4 trillion.

And those numbers are only getting worse too. Treasury’s own projections show annual budget deficits in excess of $1 trillion starting in 2020.

Simply put, a short-term fix of Social Security and Medicare would cost trillions of dollars. And that would just be a down payment on the long-term costs of fixing the programs.

The federal government simply doesn’t have that kind of money. Not even close.

To continue reading: It’s official: Medicare trust fund will run out of money in 8 years