Yes, you WILL get social security
We hear a lot about the doubts over the future of Social Security. Here are a few I’ve come across:
- “Three-fourths of those 18 to 34 don’t expect to get a Social Security check when they retire.” — USA Today
- “My husband and I are both 28, and we laugh every time we hear [‘yes, you’ll receive Social Security’]. No, we won’t receive Social Security, even though we’ve both been paying into it since we were teenagers…I can’t think of one of my peers who expects Social Security to still be around when we’re retirement age. Call us bitter.” — A comment to my last column (“When Will You Be Able to Retire?”)
- “Six in 10 Americans who have not yet retired believe they will get no Social Security benefits when they retire, more pessimistic than at any time since Gallup began asking this question in 1989.” — Gallup
- “According to one survey, 100% of people married to Robert Brokamp wish he would shave his head rather than try to pull off a comb-over.” — My wife
If you’re among the doubters (of Social Security, not my hairdo), then listen up: The following paragraph is the most important group of words you’ll ever hear regarding Social Security. It’s key to understanding how the program works, and whether you’ll get anything. Here it is:
Social Security is predominantly a pay-as-you-go program. Most of the payroll taxes that are collected from today’s workers go into the checks of today’s beneficiaries. Thus, as long as there are people working and paying payroll taxes, there will be money to pay Social Security benefits.
According to the most recent Social Security Trustees report, from 2037 to 2084 payroll taxes will be enough to cover 75% of projected benefits. That’s not great, but that’s not nothing, either.
People who think that they won’t receive any Social Security benefits must believe one or all of the following three things:
- In the future, people won’t work.
- In the future, the government won’t collect payroll — a.k.a. FICA (Federal Insurance Contribution Act) — taxes. Currently, workers “contribute” 6.2% of their paychecks to the Social Security system, and their employers match with another 6.2%; the self-employed pay the whole 12.4%. Another 2.9% goes toward Medicare. As you know if you’ve looked at your paycheck, it’s a separate withholding from income taxes. In fact, the majority of Americans pay more in FICA taxes than they do in income taxes.
- In the future, Social Security will be means-tested to such a degree that the “wealthy” (an arbitrary designation, to be sure) won’t receive any benefits. Those who don’t think they’ll receive Social Security assume they’ll be among these “wealthy.”
I don’t think Nos. 1 and 2 are likely. No. 3 is possible. The program is already means-tested to a degree, since the percentage of income that is replaced by Social Security decreases as lifetime earnings increase. However, I think that if changes to the means-testing formula result in a group losing their benefits completely, it will be a small group — certainly not 60% to 75%, as the aforementioned surveys suggest. I find it very unlikely that a future Congress — elected by future citizens — will change the program in a way that the majority of people who pay FICA taxes won’t get at least some benefits.
Those Crazy Trust Funds
For many years, the payroll taxes collected were more than needed to pay current benefits. The surplus went into the Social Security trust fund, which invested the money in special-issue U.S. Treasury bonds. However, this year — thanks to the stinky economy — benefits will exceed revenues. That’s projected to temporarily reverse, but at some point in the middle of the next decade, the retirement of the baby boomers will cause benefits to exceed taxes. This is where the trust funds come in. They’ll be sold to cover the shortfall.
In my opinion, this is the essence of questions about the future of Social Security: What, exactly, are we to make of these trust funds? Are they truly assets? Here are the two arguments:
- Those who think that the Social Security system is essentially sound will point out that of course the trust funds are real assets. They’re full of U.S. Treasuries, which are considered the safest investments in the world.
- Those who think otherwise point out that since Treasuries are federal government debt, the trust funds contain just worthless pieces of paper with a note written on them that says, “Dear Uncle Sam: I owe you lots of money. Love, Uncle Sam.”
I have to admit, I haven’t quite decided to which camp I belong. I’m inclined to go with the latter. After all, when, say, 2020 rolls around, and the Social Security Administration needs some money from the trust fund, it will take one of these special-issue Treasuries to Uncle Sam and want to exchange it for cash to be sent to retirees. Where will that cash come from? I almost think I need to see a spreadsheet or detailed flowchart or something to fully understand how all that will work. If you have suggestions for how to accurately think about the trust funds, I’m all ears.
For Now, Plan on Getting Less
That’s enough talk about Social Security for now (assuming you’re still reading). From a financial-planning perspective, I’ll reiterate my advice from my last post. If you are in or near retirement, plan on getting your benefit. If you’re younger, play it safe and plan on getting 25% to 75% of your projected benefit. But plan on getting something.
I’m sure you have your own thoughts and opinions about Social Security, and I encourage you to share them below. However, let me say this: Often, discussions following articles about Social Security turn into political brawls that degenerate into name-calling and general silliness. So please, all you right-wing nutjobs and left-wing commies, let’s keep it civil. Stick to the topic of Social Security and the facts. And maybe advice for creating a sweet comb-over.
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There are 127 comments to "Yes, you WILL get social security".
Why not plan on receiving no social security benefits? That way, no matter what happens, you’ll be covered in retirement.
Wouldn’t there be a third way that we wouldn’t receive benefits? If we opt out of them in lieu of contributing to a private account? That’s one that Bush was proposing and I like more than what is there. I like the idea of having my own asset that grows and that I can pass onto my kids. I would be more than willing to pay 1/2 of my FICA as a “tax” to keep the current system afloat while I pay 5% into a retirement account in exchange for not receiving social security when I retire.
I know that failed miserably, but it still seems to me to be one of the options on the table since a major political party that one day might be in power again proposed it.
Thanks so much for the article; this cleared up a lot of confusion for me brought on by the politicians.
I don’t believe I will get SS when I retire, yet somehow I don’t fall within your ‘one or all of 3 reasons’ categories.
The reason why I feel that I won’t receive SS is this:
When the baby boomers retire – which will be long before I do, the proportion of money going into SS vs money coming out of will be MUCH smaller than it is now.
Currently, what isn’t payed out to retirees of SS is put towards mitigating our nation’s debt, and has since SS conception.
Once this proportion flips, not only will there be not enough money generated by SS taxes itself to pay out to SS retirees, but there will be nothing to mitigate the deficit, and in turn SS will stop buffering the debt, but add to it. Exponentially.
Tell you what — I’ll believe that I’ll get a SS check when I see it.
No, you WON’T get any social security.
Aging population, increased longevity, low birth rates, and low returns on treasury bonds are all against you getting any sort of benefits.
On a side note, the surveys mentioned ask people what they “believe”. Isn’t that a meaningless question here?
I don’t doubt that the younger working generation will receive some Social Security benefits when they reach retirement age, but the benefits now already leave people living hand-to-mouth. Take that down to 25%, consider inflation, and you might as well get nothing. It’s better to assume you’ll get nothing and plan your own retirement than rely on a faulty government. Republicans, Democrats, they’re both awful and concerned only with self-preservation for the next election cycle. No government will solve our financial problems, only we can.
Sorry Robert; I appreciate your positivity but I’m not convinced.
4) Social security program is canceled. You get jack.
http://www.heritage.org/Research/Reports/2005/03/Social-Securitys-Inevitable-Future
Social Security often devolves into a political discussion because there ARE distinct political forces in action that would prefer to destroy social security for various reasons. Some are positive, like wouldn’t you rather pay less in payroll taxes and invest your money yourself (i.e. control). Some are negative, in my mind, thinking of SS as welfare.
There are many working Americans in this country that will have little to no retirement savings if SS is destroyed. I personally don’t want to live in a country where we don’t care for our most vulnerable populations, the elderly, children, the sick, etc.
So far as I understand them (being European), the US Treasury bonds are fixed-term notes (rather like the reverse of fixed term deposits at a bank). You can’t go to the Treasury at a time of your own choosing and demand payment. The Treasury knows already when it issues a bond when and how much it will have to pay to redeem it and can plan accordingly (either to pay from the tax income or by issuing a replacement bond, thus extending the debt, which will only be a problem if the US finds itself in a sovereign debt crisis, like Greece earlier this year).
When the trust fund needs to liquidate, it may present some expiring bonds to the Treasury demanding some money. As I explained above, this will not prove to be an extraordinary difficulty to the Treasury in normal times. If there aren’t enough expiring bonds, the trust fund will offer some bonds for sale in the open market. In normal market conditions, the bond will sell at fair value, and the trust fund will acquire the cash it expects.
In normal market conditions, therefore, the fact that the social security trust fund is slowly liquidated does not imply that the government gets to shell out extra money. It can certainly choose to do so by not replacing expiring bonds, but it will not be required to do so. This is why the first argument is likely to be true.
Now, it is conceivable that the market conditions at the time might be abnormal: the investors might no longer trust the US Treasury as a debtor (think Greece), or there may not be enough savings on the market looking for bonds to buy (for example, if there is a severe economic crisis at the time). In such a condition, bond prices would fall dramatically, and the trust fund would fail to get as much cash for the bonds as it expects. In such a case, obviously, the FICA tax must increase to cover the difference, or the social security system will default. This is how the second argument might prove to be true.
Is it possible that social security payments will change to be a set amount, rather than an amount based on what you earned. The British system pays about 90 pounds ($135) per week no matter how much you paid in. A bit more for married people, but not double for sure.
This way the poorest people receive an amount of money they can almost live on, whereas folk who earned more need to have saved more to maintain their quality of life.
I’m not sure, but does this method result in everyone getting something, rather than everyone getting almost nothing as the comments suggest?
National security as it is called in the UK costs about 10% of your wages, but it does of course also include the National Health Service as well as pension benefits. And despite what you may haveheard to the contrary, the health service is awesome!
I don’t think the point of the article is to encourage people to count on SS to provide for their retirement. But to assume that you will receive nothing from SS is rather ridiculous. Now that doesn’t mean that I will set up my retirement savings plans assuming that SS will be what it is today. At 26, I’m going to save what I can and if I get what the retirement calaculators tell me I would get from SS, then that’s great. If not, I’ll be covered. There’s a big difference between assuming SS won’t exist at all and planning to not need it regardless of whether it exists or not. The only real reason people won’t see any SS is if it is done away with completely (which is a completely different subject).
(As an aside, that would be an interesting topic: Is it conceivable to do away with SS completely? Could significant changes be made such as raising the age of retirement or increasing or decreasing contributions in order to improve the system?)
It’s not that we won’t get *any*, but getting $0.25-0.75 on the dollar (a high estimate, IMHO) makes most of us think we would have been better-off depositing that 9.3% (15.3% for us self-employed) of our income in a hole-in-the-ground. Heck, if you want to give me 15.3% of your income and get 25% of it back and call it a good deal, LET’S DO IT! 🙂
-gumnos
I think it’s actually a great thing that younger citizens assume they won’t be getting Social Security when they retire. We should encourage this attitude at every turn!
Why?
Because if you assume you’re not getting a cent from Uncle Sam in retirement, you’re forced to take on 100% of the responsibility for your retirement.
I’m funding my 401(k) and Roth IRA as if they’re going to be my only income sources in retirement. If I get SS, that’s just icing on the cake, but if I don’t, it won’t hurt at all.
Like many my age (28), I say I assume no SS. If I stop and think a bit, what I’m really saying isn’t that I assume it won’t be around (although I’m not convinced), it’s that I do NOT make the assumption it WILL be when planning – after all, most people seem to agree it won’t be anything like it is now. (However, I refuse to think of it as a “nice bonus,” after I will presumably have paid for other people’s for 40-50 years.)
Also, I, like many people on this site, am in pretty good financial state for someone my age, very responsible with money, tucking a lot away, etc. Therefore, if SS goes means-tested, I have a better-than-average chance of getting less/nothing, as a reward for my hard work, frugality, and savings for rainy days, medical problems and retirement. Just sayin…
What is probably going to happen is that Early Retirement age will stay at 62 (so that the people who really need early Social Security will have it), and the Normal Retirement Age will increase and the increase will be indexed to average lifespan, specifically life expectancy based on some older age like 62. There will probably be some tinkering on earnings rules, making it easier to collect SS while working (they’ve already done some of this), and some tinkering on tax laws increasing the earnings cap.
The sooner we make changes, the less painful they will be. If we had made them 10-15 years ago when economists were urging them, they would barely be felt because they would have been so small and expected.
My left-wing parents keep sending me bizarre articles on this from the Huffington Post saying to do nothing and I am deeply disappointed with Krugman’s incredibly irresponsible piece on this topic in the NYTimes.
The right-wing position of getting rid of Social Security entirely and privatizing is even more irresponsible. Guaranteed public annuities and forced savings are necessary for a portion of our population that used to die in poverty in old age.
The “social security crisis” is NOTHING compared to the upcoming Medicare crisis. Check out Figure 1-1 from the CBO here: http://www.cbo.gov/ftpdocs/115xx/doc11579/06-30-LTBO.pdf (p.19 of the pdf). That’s the terrifying picture that seemed to be the unofficial main theme of last year’s Association for Public Policy Analysis and Management meeting in DC. Academics and bureaucrats are very worried. Politics makes things difficult to fix.
I don’t believe for one second that voters will allow social security to be eliminated or even greatly reduced. There are far too many voters who rely on it to think they’ll just kiss their own future goodbye.
This is an excellent article. The main point to remember is that as long as the government can sell treasuries, then the Social Security will be funded. To fund at a 100% rate in later years an increase of 1.1% in FICA needs to happen I am told.
If you think you will not get Social Security you are really saying that the U.S. will not be able to sell treasuries. There goes the dollar and in comes anarchy. So plan accordingly with Guns, Gold, and Groceries.
However, while it is prudent to plan for hard times, there is too much at stake to let the dollar go under. You will see political changes happen eventually, hopefully soon, that will change the mindless deficit spending to something more civilized and sustainable.
I’m one of those 20-somethings who doesn’t think I’ll be getting Social Security when I retire. I don’t think Social Security will disappear because it will go bankrupt. I think it will disappear because it’s a top-heavy Ponzi scheme that will become a target of fiscal conservatives in coming decades.
In short, it’s not that I think it will become insolvent. It’s that I think the program will be canceled. Social Security’s future is sufficiently uncertain as to be discounted in any future financial planning. It’d be irresponsible of me to assume I’ll be getting a free government handout in fifty years.
A few years ago I looked into the SS Trust Funds to see how they worked.
We don’t have to wait until 2020 for the SSA to start cashing in the trust fund. It’s happening regularly now.
Unlike regular Treasury Notes, the trust fund notes are payable-on-demand. Also, the SSA maintains a daily cash balance of $0. Every day, it receives some money from payees, and every day it sends checks to recipients. If they receive more money than the send out, they buy treasury notes with the daily surplus. If they send out more than they receive, they cash in notes to cover the deficit.
In effect, the SS Trust Fund works more like an interest-bearing checking account than a traditional holder of Treasury Notes.
THANK YOU! The lie that Social Security is going under does a huge disservice to people my age, who don’t see it as a potential loss when privatization is brought up, and don’t fight back.
That said, it probably is smart to plan as if SS (and more importantly, if you have a private pension or your parents do, assume it’s going to go belly up – a lot of them have) won’t be around. Then if you’re surpised, you’ll have more money than you need, not less.
We hit the SS deduction cap last year and personally I think that’s ridiculous – let’s add that to Nicole’s list of things that might/should change – stop exempting richer people.
Arn’t you missing an option: Revolution.
I think there’s a non-zero chance, either the left-wing commies or the right-wing nut jobs could overthrow the current governmental system, and the social-security fund will be raided to pay for it.
for now, I’ll just write off FICA payments as a moral charitable contribution to our nations elderly 🙂
THANK YOU! It’s about time that someone important wrote about this. I wrote about it a few weeks or months ago, and it seems like 75% of our benefits are pretty good, especially since that’s if nothing changes!
There definitely will be changes over time, and whether they will have a positive impact or not, I’m not sure, but the thought that we’ll get no benefit is ridiculous.
One thing I will say is that planning for no or little benefit could be great because come your 50s or 60s, you’ll realize that it will be around and you’ll be able to either retire earlier or live a higher quality of life in retirement.
You miss the main problem with social security. If it was truly a pay-as-you-go program, it would be fine. Unfortunately, the social security fund is used to fund a whole variety of programs in the government. Additionally, people who never work, and therefore never pay into social security, are entitled to social security benefits. This is why 2010 is the first year in which social security payouts will exceed what social security takes in (see http://www.nytimes.com/2010/03/25/business/economy/25social.html). This is simple math, and to assume that more money will somehow magically appear in the social security fund by future workers is as foolish as choosing to go with a comb-over rather than shaving your head.
Nice to see that someone has that much faith in the continuity of our government programs and the birth rate. I don’t think the system can continue to support more old people on the backs of fewer workers. I’m making other plans. Trusting government is silly and naive.
Robert, I appreciate your optimism; but there are plenty of reasons no to be.
The one I want to focus on is this: there are plenty of taxes that people continue to pay the revenue from which no longer funds the program or project for which it was created.
I don’t know about you, but if my debts were 4-5 times the amount that I earn every year, I would begin to cut back and start “making do”. I don’t see the government making plans for a balanced budget anytime soon. Not only that, but…OK, I’ll stop there to honor your wishes. Thanks for the hot topic to get my blood pressure up this morning. 🙂
BTW, please forgive me for calling you silly. That’s not fair. Naive, though. Pie-eyed optimist, maybe?
The supreme court has already ruled that citizens who have paid in to social security are not entitled to receive benefits. Just because we are currently paying in does not mean it will later pay out. It has been shown time and time again that social security is the WORST retirement investment everyone makes. We could take that money and invest it in basically any other way and come out ahead. So I for one would be willing to give up my existing contributions if the government were to stop garnishing my wages and allow me to properly invest.
I’m dumbfounded – future credibility fail.
Why would someone stake their credibility on the future of SS?
Well, over here in Finland there is a push to raise the retirement age. It is possible that down the line, the retirement age will be 70 or even higher, which means you won’t get any social security benefits before you’re just about to keel over 😉 It is also possible that future generations will be a lot smaller and government expenses will be a lot higher, lowering the amount you get significantly.
I don’t believe I won’t get ANY money at all but I do believe the future is very uncertain and that there will be a lot less to go around so I’m preparing for it.
If I’m wrong — no real harm done, but if I’m right I’ll sure be glad I saved that money.
I’m not expecting this post to garner much sympathy, and it really shouldn’t because I’m very fortunate, but I do want to give the perspective of a top wage-earner on this. I am a real liberal, by the way — I would gladly give over tons more of my money in taxes to pay for a decent education for children, or better public housing for the poor, and access to decent medical care for those who need it. But I do get a little bit turned off by some of the social security rhetoric against the “rich”. I currently pay up to the cap, and many plans I have seen call for eliminating the cap. Since I’m self-employed, that would mean I’d be paying about 15% of my entire income, on top of the other relatively high taxes I pay. All of my wealth comes from wages (I’m not a trust fund baby, just a person with a very good job). Yet I’m in the group that even this optimistic poster would have to admit will ultimately get means-tested right out of the program, meaning I will get zero back. As I said, I’m fine with paying taxes to fund the retirements of poor people or people who face unexpected illnesses or hardships — but is it really fair to expect me to pay 15% of my large income for life to fund the retirements of middle and upper-middle class people who could fund their own retirements but choose not to? I’m not so sure about that.
@ Poster #15 (Ricky) -you certainly failed to heed the warning in the post to not devalue and polarize the commentary with political posturing. This country has spent a trillion dollars on the Iraq occupation/war – you suppose that happened since January 2009 – that’s humorous. Somehow it is abhorrent to invest in our own people and economy-in terms of healthcare, education, and infrastructure.
I have digressed. I like to think that I have an “icing on the cake” Social Security mentality -but the harsh reality is that I have not saved aggressively enough. Life is so short and fragile – I’m starting to disinvest from the idea of working, working, and then retiring and attempting to travel the world in my old age. I want my household savings to bolster our ability to travel extensively during my working life, cultivating relationships, and reviving faltering ones, anchoring myself spiritually, taking long weekends, I plan on following a career path that allows me to learn new things.
I cannot worry obsessively about Social Security, but I do need to focus more on those things I can control, building a healthier emergency fund, starting a Roth, being committed to saving for retirement-every dollar in my budget cannot go to addressing today’s needs.
I am planning to NOT get any social security, just to be safe. I admit I do not know all the intricacies of social security, but I do know that many predict the fund with be plain bankrupt. However, I do get your point that people will always be working, and that a reduced benefit is more likely.
I don’t trust the government to take care of me, so I plan on taking care of myself. However, I will be angry if I don’t receive what I contributed.
HA! Great article, Robert! I loved this – informative, yet funny.
I don’t expect to get any social security, so I’m planning my retirement without it, so anything I did get would be a bonus. I agree with you that everyone will probably get some, but the number is so blurry and unpredicatible, I’m taking the easy way out and just not counting on it. 🙂
Thanks for making SS an entertaining topic – a difficult feat to accomplish! 🙂
I concur with many of the posters above: if social security is still around when I retire, I will consider it an additional bonus and maybe take a few extra vacations with the money. But, for now, I will plan as I won’t receive any social security money after all. I think that for my generation that is wiser.
Besides, one point this post misses is the fact that tax rates will be much, much higher in the future, so even if people try to retire to a “low” tax bracket, it will still be highly taxed.
If Social Security’s going to be there when I retire, why has the media been telling me for twenty years that it’s going to go bust before I reach retirement age? My generation has actually been -trained- to not expect Social Security benefits. Surely there must be a reason for that.
So we save for retirement via IRAs and 401ks, and now some high up in government are starting to eye those as a new, untapped source of tax revenue, to shore up a chronically unbalanced budget.
The health care reform may help save Social Security, for a while, as the “reforms” screw older people and help to bring the average lifespan down below the average retirement age (which will no doubt be raised above age 70)…
I certainly don’t take SS distribution estimates into account in my personal planning, which I suppose is mathematically the same as assuming I won’t receive any benefits, but that’s different from “believing I will get no Social Security benefits” – there are *way* too many economic and political variables for me to make any sort of guess as to what will be going on in 40 years. And there’s little, if anything, I could do about it anyway. If I get benefits I don’t expect, then it’s not like I’ll regret having saved “extra.” And if I don’t, I’m comfortable enough thinking of SS as a tax we pay to live in a society that makes some meager gesture toward keeping the elderly from starving to death.
“as long as there are people working and paying payroll taxes, there will be money to pay”
If there is any one thing history teaches us, it is that it will repeat itself.
Apply this to the history of Ponzi schemes. Sooner or later, it will break.
I’m 8 years away from full SS benefits but I’m not relying or betting it will be there (I’m hoping for it as a supplement, which btw is what is was supposed to be anyway). I don’t care about what I paid in; I am intelligent enough to understand that I am responsible for my retirement income, not some Washington politician or glad-handing “financial planner” (that takes care of planning for his retirement with your money before he thinks about yours).
We are living pretty much exactly like the French did just before their revolution. They could probably gone on without the revolution save one thing: It wasn’t the crooked politicians lining their own pockets that brought it to a boil, it was supporting a corrupt system that allowed the few elite to feast on the majority that broke down the doors of the Bastille.
How close are we? When SS goes broke, look out. And it’s headed that way.
How many patches can you put on a tube before it refuses to hold air anymore?
I usually am left disappointed when I “expect” to get anything from the government. Except that is when I “expect” to be disappointed, then my expectations are usually met.
Just to correct an earlier poster, the equivalent in the UK is National Insurance, not National Security. And there is an element of contributions-based income. At retirement age (which is in the process of changing), you get a state pension which is dependent on a number of things, including whether you are married, and crucially how many years of qualifying national insurance contributions you have. There are ways round this – e.g. people receiving carers allowance (for full-time unpaid carers) are treated as though they are paying NI. You need (iirc) 30 years of contributions to get the “full” state pension.
The value of this pension has decreased significantly in real terms over the last few decades, so no, I don’t assume that I will get anything meaningful from the state when I retire. If I do, it’s a bonus.
Robert, I agree with your wife. Forget the combover. Bald is beautiful. I think my husband looks sexier now shaved bald than he did 20+ years ago with lots of hair.
“Blaise Pascal” at 17 appears to be correct, and I was wrong. The US social security trust funds do not, in general, hold fixed-term Treasury notes but instead exist as demand deposits with the Treasury.
However, while this changes the mechanics and the accounting, it does not change the fundamentals. The trust funds are a liability of the Treasury, and when the funds are net liquidated, the Treasury will, in normal times, be able to convert this liability into general debt (regular Treasury notes) if it does not wish to cover it from tax income. In an abnormal market in which the Treasury is not able to sell new notes at an affordable price, there will be a problem, but it is not a problem of the social security system, it is a full-scale US sovereign debt crisis (in the style of Greece). — Of course, there is greater risk of legislated default than in regular Treasury notes, since it’s a government-internal debt relationship.
As an aside, there is nothing Ponzi like in the social security scheme. A Ponzi scheme starts from a handful of original members and expands exponentially until it covers the whole population making it crash and burn (unless stopped by police at an earlier phase). The US social security system has none of these characteristics.
Based on this article, there is a huge amount of trust that the government will give social security money back to the people and not “re-purpose” it and spend it on something else.
I agree with the people who say we’re better off planning for the worst. If we get social security, great. If not, I’m covered.
It’s naive to think that in the face of contributing a few $100k and only receiving back 50-75% of that back that the Millenial generation (and those to follow) will not rise up on their egalitarian and meritocratic values in protest for reform and the full amount due them.
I for one wont let our parents (Baby Boom and GenX) generation get away with their negligence…
let’s keep it civil. Stick to the topic of Social Security and the facts.
The facts are that the numbers don’t add up.
The civil thing is to fix a system that over time has become corrupt rather than to make excuses for the corruption and thereby create an environment in which it can continue.
Ducking these issues has not been working out so well for us lately. I am of the sincere belief that the time has come to take a more serious approach.
Rob
One problem that most people are not aware of has to do with the special issue bonds that are created with the SS surplus. They are not actually bonds; if they were you could sell them anywhere (ie on the open market). However, they do not work like that. They can only be sold to the Treasury, and since the Treasury has no money, they will have to issue treasuries bonds for the exact same amount.
The potential problem with this is that we have no idea what the market will demand for an interest rate on those treasuries. It’s this hidden risk that can/will make SS payments more expensive than people expect.
Uncle Sam would have to give that money to the Social security administration by raising taxes on the employees of that day. I dont see any other option.
Low taxes cannot sustain for long, can they?
The sad thing is that those people that think it won’t be around, are still happily paying a large chunk of their income to the government and expecting no return. If you don’t think it will be around, petition your representatives to let you stop paying! Don’t be a dog and role over.
The very first commenter, Zack, had it right. Plan your future thinking that you will not get social security, then you will be covered regardless of what happens. There are a ton of resources out there now for people to learn about investing and setting up IRA’s.
Investing is some shape or form for retirement is your best option. Especially if social security is limited, you’ll have additional income.
Let’s say my savings account owes you $10,000. The savings account is empty, but my checking account owes my savings account $10,000. Therefore you think there is a trust fund which will pay you $10,000.
But the fact is, my checking account is empty, and I am living so far beyond my means that half of my annual spending is funded by borrowing, to the point that soon the interest on my debt will consume the biggest portion of my income.
Are you going to get your $10,000? Shake your tiny fist and demand to get back what you paid in all you want, but you’d be a fool to expect it.
COLA…ever hear of it? The government sets it to what they deem acceptable. If inflation rises and the cost of living rises higher and faster than the COLA, then YES…people will be in a losing investment with social security. Socialism SUCKS!
Plus…because of the massive baby boomer generation, they will HAVE to raise the retirement age above 65. (sound like Greece?)
“The sad thing is that those people that think it won’t be around, are still happily paying a large chunk of their income to the government and expecting no return.”
Happily? HAPPILY? What what WHAT???
“If you don’t think it will be around, petition your representatives to let you stop paying! Don’t be a dog and role over.”
Or spit into the wind, for all the good that will do you. Many people have tried to stabilize the system, but every time, the current crop of bluehairs start screaming. And for quite a few decades now, there have always been more bluehaired voters than young people.
We are screwed. This is a depressing fact, but a fact it remains. The truth doesn’t care whether it is cheerful or not.
I have to agree with Miltiadis that the population factor could play a key in the downfall of SS.
When I last received my SS letter, it clearly stated that,” …by 2037, the payroll taxes collected will be enough to pay only about 76 percent of scheduled benefits.” Do I think that we all will receive “something” by the time we retire, as the writer stated? Honestly, I just don’t know. The amount paid into the system isn’t keeping up with inflation. Plus, SS benefits pays a 3% increase every year (except it has been stopped for a few years starting in 2009). With the funds being depleted by our policy makers and the fact that more is being used up versus what’s coming in, I’m not so optimistic about receiving benefits.
If your wife THINKS it is sexy to go bald, it IS. Shave your head and put a smile on your face. And hers.
I’m with commenter #29.
Retirement age to receive full benefits has already been raised for some of us. I was born in 1967 and will need to reach age 68 before I get full SS benefits. Big deal. I likely won’t ever “retire” anyway; I see myself remaining active and earning income well past that age if my health holds out. If it doesn’t, then that’s when full SS benefits plus my own retirement savings will come in handy.
As for “choosing” to not participate in FICA withholding: you always have a choice. Move to another country where you don’t get taxed to provide benefits to you and your fellow community members. Living in a developed country with a high standard of living (safe drinking water, roads, police and military protection, electricity, etc.) means paying some taxes. Deal with it or move to a less developed place where you really see how much it costs for these things since you pay for them yourself, make do without them, or rely on your fellow community members to help you out. Oh wait, is that much different than paying for these things through contributions to a “government” you get to choose? Hmmmm….
question – anyone do the math on their early vs. normal vs late retirement date SS payouts?
Almost every bit of advice that I see suggests you should wait to the year your benefits max out (in my case 70), but when I run the numbers it looks like vs. early (age 62) start, I wouldn’t ‘break even’ on a cash basis (eg getting to the same cumulative benefit $s) until 78 or 80 (and that’s assuming perfect COLA and no time value of money – otherwise break even is more like 80-83).
So, in my case given family health history & any political/program risk, seems like it isn’t such an bad idea to take benefits asap.
Help me out – am I missing something?
Yes, because obviously it is necessary to tolerate inter-generational theft via Ponzi scheme in order to have safe drinking water, roads, police and military protection, electricity, etc.
Shave the head! Funny quote from your wife.
I am glad to know I may be getting something. But what erks me more…is that I have no choice but to shell money out to something that is not a worthy investment for me.
I’ve always thought that Social Security is a pyramid scheme….it requires that the current working generation is either a bigger population or paying more than the size of the retired generation requires.
No one expected the Baby Boomers, a generation which is more populated than those that have come since…and as soon as retirement age reaches critical mass for that population, we are in trouble.
No one expected that the average lifespan would increase dramatically, meaning that “retirement” is no longer 5-15 years…it’s 10-25. Our generation will have to work longer or pay more to keep that going.
I’m 30, and I don’t want to pull the social security rug out from under those who are in retirement (or close). However, I do think the plan should be phased out. I don’t want the generation after me having to pay more and more to support this pyramid scheme.
If 75% of those 18-35 don’t think we’ll get it, I see that as a clear message we expect the system to change or collapse.
I agree with your wife.
I’m in the “it will be means-tested” camp. There are also a few other factors that play into this: prolonged unemployment at 9-10% mean fewer people are paying into the system. How long this lasts will have an impact on the continued solvency of the program. I believe I heard a report that this year SS expects to pay out more than it brings in–a few more years of that pattern could leave the program in a substantial hole.
There’s also news that the US has seen a decline in the birth rate over the last two years. If this trend continues, fewer people–>fewer workers–>lots of retirees would present a problem (see also: Japan).
There’s also news, again recently, that many Americans aren’t saving for retirement outside of social security. So for those who retire and receive 75% of their projected benefits AND who have no other savings for retirement, what will the government do? My guess is that we’ll go even further down the means-testing path. Anyone who can live comfortably on their 401K savings, (decided of course by Congress, who will feel the need to “do something” about retirees living in poverty) will see their social security benefits go to those who didn’t save.
Add into the mix a large and growing deficit, which will at some point lead to higher taxes allowing me to save less outside of social security, I’d have to say I’m on the pessimistic side of this equation.
So, while I appreciate the thought process behind the article, I’m definitely in the bitter/disbelieving camp.
Edited to add: an increased life expectancy also has an impact on how much the program will pay out. People are living into their 90s, which was very, very rare when the system was established. Until this too, is factored into the equation, I doubt it will be solvent for as long as projected.
All Ponzi Schemes FAIL in the end…
If you are younger, it doesn’t really matter if you include SS in your retirement calculations since those calculations are just guesses.
For someone in their late 50’s and up – they need a more detailed financial plan which should include some estimate of SS.
As many above have said, it’s in everyone’s best interest to assume responsibility for one’s own retirement (whatever that turns out to be).
However, let’s not forget that Social Security was created as a safety net to insure that the most vulnerable weren’t absolutely destitute, a goal that is in all of our interests. So the idea that I would expect to “get” anything from a social program intended for people whom I, barring something awful, won’t be counted among, seems ill-informed at best.
CF’s comment above (#28) suggests that, rather than ratcheting up contributions by the wealthy to fund benefits for the middle and upper-middle class, perhaps the income requirements for benefits should be drastically lowered (to revive Social Security’s original intent) and a reasonable flat-rate contribution be imposed, shrinking the pool of beneficiaries and lowering the impact of contribution. Meanwhile, we start thinking of social security as a way to limit extreme cases, rather than an entitlement of reaching an arbitrary age.
Bob: just shave it!
Without reading all the comments yet, in response to “Aging population, increased longevity, low birth rates” – America isn’t a closed system. It is nearly certain that immigration policies will be eased should the supply of labor ever fall below the rate of demand.
Thank you Robert! People seem to cling to their belief that Social Security is somehow in danger.
Social Security is adjusted by Congress every 10-20 years to account for demographic changes. This may mean a year or two higher retirement age to account for longer life-spans.
Whatever Congress does to ensure Soc Sec’s long term health, the average American will be paid much more than they contributed! AND, people don’t remember this, it’s also a disability and life insurance plan that pays you if you are widowed or become disabled. That triple package doesn’t even exist on the private insurance market.
And just think, what if ALL your money was in a 401k and social security didn’t exist and you were getting ready for retirement 2 years ago. In 2008, private retirement accounts dropped by $2.8 trillion. How much did Americans lose in Social Security benefits? Nothing.
The point of this post is right on. If you want a nice retirement, of course you shouldn’t JUST rely on Social Security. But you should also take comfort that you will have one constant, guaranteed, life-long source of income in retirement.
When people think they’re right, the truth is meaningless. 😉
I don’t care much about social security. So I’m paying in for my parents’ and grandparents’ retirement; I’m fine with that. I won’t be having kids so in many ways I have to plan to take care of myself anyway, SS or no. Whether it’s there or not, pays 25% or 75% of expected benefits when I retire, I don’t worry about it.
I do care a LITTLE though. My husband is much closer to retirement age than I am, and has never saved a dime in his life. If he should become unable to work, we would probably have to rely a little on his social security (though I’m working to avoid that). So when I say I don’t care MUCH… I do care SOME. Just not enough to argue about it. 🙂
Thanks to Nicole and “Linda in Chicago” for bringing rationality.
Here, there, and everywhere, a lot of people just don’t seem to realize that we truly do, in America, have the government we choose. Every single service provided by government is something that voters have demanded.
Politicians don’t come up with “pork barrel” budget requests out of thin air; they get them from their constituents. They don’t start oil wars just for the fun of it; they do it because their constituents demand gasoline at less than true market prices. They want to keep their jobs, so they do what we ask them to do.
Agricultural and energy subsidies … government-funded health care for the poor … disability benefits … enormous prisons full of people who could have been educated out of a life of crime if WE THE PEOPLE had chosen to spend our money that way instead: it’s all what we asked for.
You may say that Social Security doesn’t count – you didn’t ask for it. It originated during the Great Depression when thousands – maybe millions – of people could literally have starved to death without it. The government acted to prevent a humanitarian crisis, and voters opted to keep the system in place – and expand it.
If you are willing to give up some other government service in order to ensure income security for all in old age, or if you think it’s time to close out that system entirely, write to your representatives. And vote.
It is unlikely that SS will be means tested any more than it already is.
Until recently, SS was considered to be a model of government programming. People liked it. A big reason people liked it is because it helps everybody. (Its redistributive properties are even now not well known outside of policy circles.) The SSA wants to keep people liking it. Even politicians will not want it to turn into a TANF kind of program. Nobody likes welfare politically.
And it doesn’t need major fixes, just a few tweaks, though the more we wait, the bigger those fixes will be.
The SSA is full of good people who care deeply about the effects of social security on the well-being of older people. Changes will need to be made, but their focus is on making those changes in a way that will do the least amount of harm, particularly to the people who need SS the most, while still not angering people at higher income levels. That is the focus of by far the majority of their research– how to keep SS solvent doing the least amount of harm.
Politicians, and media… they’re not so much in agreement about what needs to be done.
Somebody above uttered: “As an aside, there is nothing Ponzi like in the social security scheme. A Ponzi scheme starts from a handful of original members and expands exponentially until it covers the whole population”
The “handful” were the original recipients of SS who got $ without paying in a dime.
It is clear that it has only survived this far because of the influx of new “members” annually. And it is clear that today’s workers are economic slaves to the retired.
The only reason they tolerate this is because of the promise that later on, they will become the slaveowners themselves. Otherwise, it would never have gotten off the ground.
It is a Ponzi scheme, pure and simple. The only variation is that those at the top of the pyramid die off and allow those below to rise another echelon until they also reach the top, at which some point they die off too.
Math does not lie; it is a constant. And the math tells us it will fail if it does not either (a) reduce its payout or (b) gain new revenue.
Work smart and save, save, save. And if you’ve been in the silver market for over a year, congratulations to you. You have hedged inflation for another year.
We will get whatever the owners of most of our debt and dollars give us. Looking at social security in a vacuum and not at the larger macroeconomic challenges we face is pointless. Continuing to fire up the printing press is not a long-term solution.
Don Trump is the zen master guru of the comb-over. Spend 10 years meditating in the basement of Trump Towers, and you will achieve enlightenment.
Most find it difficult to live on SS at full benefits. So at 25%, give me a break. I’ll save for retirement on my own and forget SS exists. I think of it as just another tax.
Shave your head. 🙂
I do believe we will have some social security, but we save like there won’t just in case. I rather be safe than sorry, but I don’t accept that there will be nothing.
This article assumes that:
1) The U.S. government will always maintain a AAA credit rating.
2) Social Security is a relatively good investment.
Neither assumption is even remotely true.
There is a fourth and statistically real reason why some people do not believe that they will ever receive SS benefits: they believe they will not live to the age where SS benefits are paid. I have a few close friends who don’t believe that they will live to see their 60s, based on family history, health issues, or simply because they have no interest (at their current young age) of living to an age where they perceive their own body will limit their abilities.
SS has made it more difficult to retire for anyone in the middle class on up. Yes, I said it. It has made it MORE difficult to retire. If I could dump the percent of my salary going to SS in to I bonds and a savings account, I wouldn’t have to put as much into retirement and would be able to travel more often.
Thanks FDR … for nothing.
Thank you for this article. Why do we have social security? A majority of US citizens do not save sufficiently for retirement, even for necessities/basic level of living. I really don’t see that changing any time soon. Financial literacy is LOW. It is a social safety net that does what it does, preventing a significant portion of retired elderly from falling below the poverty line and becoming an even greater burden on society.
The people who post on personal finance blogs on average are more interested and informed about finances, and feel very strongly about having control over their finances future. But people like that are the minority. And even well informed, well intentioned people have lost their retirement shirts from such saddenly regular meltdowns such as the tech boom and bust, Enrons, Madoffs, housing and and stock market busts. Private sector, the trend is to eliminate pension and other retirement benefits. Yet the solution proposed is to eliminate social security and put yet more money in the stock market? No thank you. I like the idea that some minimum amount will be there for me when I retire, and I don’t want to be surrounded by desperately poor people who are too old or sick to work while I’m retired.
Hey
I’m just ecstatic to hear that the fund won’t be dried up by the time its my turn!
A very well-needed article.
Don’t sweat SS. They can tweak the program in tons of ways to make sure it never “fails.”
Worry more about Medicare. Costs grow for reasons outside the control of the program/legislators (e.g. medical advances, new drugs/procedures) and they can’t reduce outflows without (drumroll please) refusing care to folks. Also, if you think retirement planning is hard if you assume zero SS, just try it assuming no/rationed Medicare. Those hip replacements will eat up 10 years of savings…
When Social Security was created, with payouts beginning at age 65, the average life expectancy was 62 for men and 63 or women. Most people never expected to receive it, because people back then were expected to be reliant upon themselves and their families. It was just an old-age insurance policy for those few people on the far side of the bell curve who made it not only to the average life expectancy, but two or three years past it.
It was never supposed to provide anyone with 25 years of “retirement.” The concept didn’t even exist back then. As life expectancies increased, early recipients enjoyed 25 years of loafing at the end of their lives, thanks to the younger generations paying in, and recovered everything they themselves had contributed in less than a year.
What is wrong with the idea that each of us is responsible for taking care of our own selves? I want to take care of the elderly in our country too, but truthfully in this country age has a higher correlation with wealth than any other factor. The elderly in the USA are ALREADY the richest people here.
Now I know that is not true in every single case, and I am fine with pitching in to help those who would truly be in poverty. But does that mean we should all be auto-enrolled in a Ponzi scheme? And another thing – what do you do about people who have been deadbeats all their lives? Why should we suddenly feel sorry for them just because they are now OLD deadbeats? Guess what, if you’ve spent your life making bad choices you are probably going to struggle in your old age. This system ensures that everyone in both Generation X and Y will struggle during old age, whether they have made bad choices or not.
Yes, you’ll get social security – just how much is the question?
Excellent article on explaining how Social Security works. The most important takeaway is not to solely depend on social security benefits for your retirement.
One solution is to lift the cap and tax all earned dollars, not just the first $106,800 (current level in 2010).
I’m not saying I’m in favor of it, but that has been floated as an “easy” fix.
@Linda in Chicago
You are wrong about your full retirement age. For those born in 1960 or later, the full retirement age under Social Security is 67.
The reason Ponzi schemes necessarily fail is that they are set up to grow faster than the population, and that the payments to existing members are solely funded by the admission fees of new members, given in exchange of a promise of a future payment. Once everybody is a member, there are no new members to fund payments, and the scheme defaults.
A public pension system does indeed have similar characteristics (thanks to “cheapcookies” above for pointing it out). There is, however, an important difference
A properly constructed public pension system is not set up to grow faster than the population. In fact, the system maintains the pace of the population.
(There is also an argument that your admission fee is not in exchange of a promise of a future payment to you, but that’s much more contentious.)
Ponzi schemes fail when there are no new members and thus no funds for promised payments. Pension systems (properly managed) never get there.
As a couple of other comments have already pointed out–Social Security (originally called ‘social insurance’, which I find a great deal more accurate) was *never* supposed to fund two decades or more of a comfortable retirement for *anyone*. Retirement is whatever you save for it–whether under a mattress, in a 401K, IRA, or wherever else. (or if you’re one of the lucky few, whatever your company pension gives you). Social Security is supposed to be the last-ditch safety net that keeps the elderly/disabled/orphaned from eating garbage out of trash cans and living under overpasses. To cry about how you’re never going to get back what you put into it, whether true or untrue, is to completely misunderstand what the program is for, IMHO. And if you have a high enough income or a comfortable-enough retirement fund that you’ll never expect to need SS to pay your bills–do you cry about never getting back what you put into your car/homeowners/medical insurance as well?
agree with @hope
SS should be seen as a way to help low-income seniors (those who could never save in the first place) and not as a pension fund. If you’re earning near an average income, don’t complain that the benefits are very small, some people have to live with that type of salary their whole lives.
I just wish the % taxed from our income wasn’t so high :p
By the way, what is up with all these articles speculating on what will happen? Will cash be cheaper? Who knows. Will social security exist in the future? Beats me.
Even if speculation is interesting sometimes, you often gain very little. Personally, I’d like to keep these kinds of blog posts to a minimum and focus more on what we DO know, right now. Seems to me that this would be more productive when it somes to personal finance.
Just my 2 cents
The Great generation deserves the cash more than us anyway. I’m 28 and have had it pretty good so far. I consider Social Security payments taken directly off the top of my paycheck to be a tax on the good life. The folks that are receiving these benny’s deserve my tax.
I found the article informative. Being 28, I’m one of those “Social Security? what’s that?” people. I plan on making my own retirement and whatever the government throws my way in…oh…about 2047, I’ll toss it into savings. To dwell on it anymore than that brings along bitterness.
I’m hoping for the best, planning for the worst. I think I’ll get something, but I’m not counting on the precise figure they report to me every year on my benefit statement.
Essentially it will come down to either higher taxes or lower benefits. We have no idea who will have the political clout at that point in time (the taxpayers or retirees) so it’s tough to make a prediction.
Wasn’t SS supposed to be a “retirement plan of last resort” anyway? Amazing how people who were probably against SS at the time got used to that monthly check when it was their turn.
You 20 somethings better hope that you never become a widow at the “wrong” time, or that your investments only go UP. For those friends of mine who had the terrible tragedy of their husbands dying prematurely, SS has been their lifelines financially. Also, the elderly that I work with would literally have nothing if SS was not there. I’m not so sure that in 50-60 years something might not befall you and you need help…I’m glad there is a SS safety net for all of us. One never knows what the future will bring.
First, I’m flattered/humbled that I got quoted at my crankiest. I’m the (selectively) bitter 28-year-old…
I appreciate this post, but I’m still not going to plan to get more than about 75 cents from Social Security when I’m roughly 93. As several have noted here, the pessimism will pay off either way: either we’ll be able to retire when and how we want, or Social Security will still be around and we’ll be able to retire when and how we want AND afford a sandwich once a month. There’s no losing!
@Peggy says
“If Social Security’s going to be there when I retire, why has the media been telling me for twenty years that it’s going to go bust before I reach retirement age?”
This comment was probably sarcastic (I hope) but in case it is not: the answer is because the media makes their money by getting people riled up so they will keep watching & reading. They are not an unbiased truth-telling machine. Please don’t rely on the media to spoon feed you your information.
Social Security will be there, all they need to do is print more money since there seems to be no consequence to it. The U.S. can use the threat of nuclear annihilation if anyone has a problem with it…
Here’s a piece by Doug Orr on the topic. It’s five years old, but his points are still valid and timely.
http://www.dollarsandsense.org/archives/2005/0505orr.html
At the time, then-President G.W. Bush was trying to privatize Social Security, so the article is primarily aimed at Bush’s arguments for doing so. As we see from the comments to this post, such arguments are still alive and kicking, though largely based on fear and misconceptions, such as the idea that Social Security is a “bad investment”.
I suggest that we need to follow the money and look at who would really profit from Social Security “reform”: the large brokerage firms that would get the privilege of managing private retirement accounts. They would love to get their hands on that money, and most of us would be worse off for it.
Didn’t Bernie Madolf go down in a huge “pay as you go” retirement system.
So I guess government funded ponzi schemes don’t count.
People tend to forget that SS was created in the New Deal era and that the retirement age was BEYOND what the majority of people would live to (62) so the gov’t thought they wouldn’t be paying much out.
Oops. I have a feeling that they are going to “fix it” by upping the age to 72 or 74 by 2020 or 2030.
By then people will live only an average of 6-8 years longer (78-80) and the gov’t won’t have to pay out as long.
I plan on not getting anything from SS. I also plan that if I do I’m going to try to break their mortality tables (my grandmother is still going strong at 91). 🙂
So the government “borrowed” our retirement and replaced it with treasuries which the american taxpayer has to pay off. Gee so I get to pay for retirement twice. The money we paid into the system is not sitting in a bank acct. some where it’s been spent. So they will have to replace the funds with taxes.
I’m saving & investing for my retirement, there’s no way that I’m going to leave my retirement to someone else. The government isn’t responsible for my retirement. I don’t really plan on social security on being there and even if it is when I get older, I’m 27, I just want to be sure that I have the retirement I want. Its all up to me.
The problem with assuming we will get social security (I’m 27) is that it’s an assumption based on chance. None of us can afford to leave our retirement up to chance and I think it’s safer and more prudent to assume it’s not going to be there when saving for retirement for those 35 and below.
@JB: “The problem with assuming we will get social security (I’m 27) is that it’s an assumption based on chance.”
Balderdash. It’s based on having the willpower to demand that this basic social insurance program be preserved.
Social Security is the law of the land. It’s not going to disappear unless the Federal government abolishes it, and that’s why we need to pay attention to what it is and how it really works.
Assuming that you can put your money into private investments and be guaranteed enough to retire on – now that’s *much* more of an assumption based on chance!
A lot of people learned that the hard way over the last couple of years. A lot of people learned that the hard way in 1933. That’s part of why we *got* Social Security.
Of course, we can do our best to calculate *just how much of a chance it is* based on the market’s past performance. That’s what we all try to do, if we invest. But things happen: market scares, recessions, depressions. We can’t always predict them.
@Nicole: “…I am deeply disappointed with Krugman’s incredibly irresponsible piece on this topic in the NYTimes.”
For those who haven’t read it, I believe Nicole is referring to this column:
http://www.nytimes.com/2010/08/16/opinion/16krugman.html?ref=paulkrugman
Nicole, care to elaborate on that? Because I think Krugman pretty much nailed it.
There may be issues with Social Security, but the bigger issue is social insecurity. Fear. And worse, resigning ourselves to the myth that it’s just going to go broke or disappear somehow. There are people pushing this myth precisely because they want it to happen.
I might be able to get some benefits, but like Zack #1 I’m not counting on it. That way, anything I do get will be a nice bonus.
Social Security is unsustainable: fewer and fewer workers supporting more and more benefits. (Compare the birthrate in FDR’s day to what it is currently.) How on earth anyone expects an upside-down pyramid not to topple over and crash in our lifetimes is beyond me.
Unless we decide to make more babies to support these benefits, the only chance this program stays afloat is if we raise the social security age to unattainable levels. Personally, I’d prefer if the government just let me opt out of it.
Of course Social Security will still be there when you retire. It’s been around for 75 years, it’s not going anywhere. No politician in their right mind would dare broach the idea of killing it off. How would that even work? Would you gradually taper out the benefits for current retirees, while the current generation of workers pays into a system that is being wound-down before their very eyes? And you think voters would accept that? Really?
The die has been cast. Ever since the program was started, and benefits were paid to people who never contributed to the system, it was inevitable that the program must either eventually collect from people who will never be paid, or continue forever. The political no-brainer is to keep the system going forever. I can’t think of any better way to guarantee a 1-term presidency than to preside over the Congress that killed Social Security (while still asking the current crop of workers to keep paying). The alternative would be to simply flick a switch and terminate both contributions and benefits simultaneously, immediately condemning millions of retirees (read: voters) to poverty. Equally politically suicidal.
Don’t give in to scare-mongering. Social security is not going anywhere. At some point in the next 30 years, yes, they might raise the retirement age another year or two. Or, they might bump up your FICA deductions by a percent or two. Or, they might even raise the income cap a few thousand dollars. But here’s the kicker: any one of those solutions would solve the problem, and none of those solutions sound particularly painful or dire to me. So what’s with all the panic?
I consider the money to SS a donation for all the people who have fought in the war, marched for rights or my kindergarten school teacher etc. It is my current way of caring for todays elderly.
That isn’t true but whatever makes it easier to look at that $$$ gone each pay.
It is better to assume no return and still save. I don’t want to be eating dog food when I retire. If SS is around, maybe I can use that money to travel.
When people say they won’t receive social security, I take that to mean that they understand that they will receive a negative return on their investment (Social Security is really just a forced retirement program).
Also, the treasury bonds held by the SSA have value but they have to ‘re-tax’ to collect on them. The government agencies which spent the money do not have a means to repay them.
Lil #74 had a point I’m glad someone finally got to. My personal reason is family history, but I do not expect to live to receive SS.
I do not believe the program will ever disappear, it is to politically favorable. However, I saw someone else post this somewhere above, according to the SS website 67 is the maximum age to get ‘full’ benefits, however, I remember getting many forms from the administration saying 72 was my ‘full’ benefits age.
Similarly a couple people mentioned a coup of some sort, and I do not believe this is out of the range of possibility given our governments current job.
@Kevin (105) I agree that none of those solutions sound that bad, but clearly nobody wants to be a member of the Congress That Decided Voters Don’t Get Benefits Until They’re 78, or the Congress That Deducted Even More From Your Hard-Earned Paycheck. So Congress does nothing.
I think the reason those of us in our mid to late 20s don’t believe we’ll get anything from SS is that we’ve been hearing about these potential not-so-painful solutions at least as long as we’ve been able to vote, but nobody’s actually gone through with them. With each passing year of government inaction, the numbers look more grim.
But there is no panic. We’re calmly and realistically planning for our futures with no (or very small, very late) Social Security benefits.
Side note here: Can people please stop comparing the US to Greece? Because there’s a critical difference between Greece’s debt and the US’s debt. Greece had a debt in Euros. The US has a debt in dollars. The US can print dollars. Greece can’t print Euros.
Now, inflation is another concern, but as long as the dollar is the reserve currency, the US can pretty much print away. Even right now, with the US debt at very high levels, there are *deflation* concerns, not inflation concerns. Treasury yields are falling as investors around the world look to them as the safest investment. Not a lot of signs that the market is worried about the devaluation of the dollar.
Can you imagine a scenario in which the US pays out Social Security benefits to someone and the check bounces?
Very well laid out article and case for future SS. Some problems with the system include the fact that life expectancy was MUCH lower when it was established, new and innovative medical advances are increasing costs big time, and there are fewer and fewer workers per retiree in the pool due to decreasing birth rate. All these factors ensure that we will NOT receive the same level of benefits in real dollars that our parents will/do.
So
Also, SS is not just retirement benefits.
SS pays for disability, and those applications are on the rise.
Yes, you will initially be denied, no matter how severe your disability, but if you hire an attorney and jump through the paperwork hoops you will eventually qualify for SS disability.
A big benefit of SS disability is Medicare eligibility within 24 months (immediately for some diseases)
The above is another HUGE drain on SS few discuss.
It looks like everyone so far has forgotten a case:
If you’re a certain category of state employee (including most school teachers and university employees), you WON’T get Social Security because you’ve been trapped in your state pension system instead.
Apparently I was six months short of being eligible for any kind of Social Security benefits when my first (corporate) employer crashed and burned in the dot-com bust. My next job was at a state university, where we can’t pay into Social Security, and we can’t make up the years of pay we put into the university system if we ever end up going back to the corporate world. My state’s pension system is currently only 60% funded and there are rumblings about calling it bankrupt and letting us all fend for ourselves with neither a state pension nor Social Security.
For those of us who can’t rely on the federal government and have to depend the states that employ us (several of which are on the verge of insolvency this year, as opposed to 30 years down the road), we wish we had Social Security’s “problems.”
Comb-overs are worse than the Social Security mess.
Never expect to get any benefit from money taken by force.
My biggest beef with the Social Security discussion (and you contributed to it with this post) is that most people only talk about it as a RETIREMENT program.
While it contains benefits that might be construed as retirement benefits, it’s actually structured as an INSURANCE program. In fact, it’s often referred to as OASDI, meaning Old Age, Survivors, and Disability Insurance. It’s essentially a significant insurance policy against growing older than your assets will allow you to live a decent lifestyle, against the income earners in your household of dying young, and against a long-term disability preventing you from working.
Not to throw another political hot potato into the mix, but:
There have been several posters who referred to declining birth rates (fewer people paying into the system) contributing to the problems the system faces.
Allowing more legal, working-age immigrants into the country would be a solution to this issue. Currently the immigration system is a bureaucratic maze and doesn’t allow work visas for many who would like them. That’s part of why we have the illegal immigration problems we do. Making it easier to navigate and easier to come here to work or start a business legally could actually help fund programs like Medicare and SS.
What I find so insidious about the far-right is their insistence that Social Security is some sort of entitlement (codeword for ‘charity’) program rather than the straighforward insurance program into which millions of Americans have been putting their own money for decades. In addition given the dubious, if not openly dishonest and fraudulent, manner in which Wall Street has been involved with the near collapse of the world economy, why should I feel any confidence that Republican programs to privatize Social Security and put it into the hand of these same people will suddenly make them honest and straighforward. I for one do not feel that confidence and see no reason why I should trust them with my retirement funds. Particularly since it is a repeated Republican policy to get rid of the kind of oversight and regulation which would prevent any such fraud.
I think SS will be around for years to come but the expected payout amounts may well be reduced because there is just not enough money coming in to keep up. The trust fund should have never been allowed to be moved into the General Fund for the Government to spend for anything and everything they wanted now. If the SS money being pay in from today forward were truly put into a trust fund to only be used for SS payouts it could be around for many many years to come. Also if you did not put anything in you are not going to get anything out. I paid into SS for 44 years and expect to draw out most if not all that I paid in. I am retired now and not collecting my SS yet but with the prices of everything going up it will really be needed by the time I do start collecting just to keep my bills paid and try to maintain my current standard of living. Four years ago when I retired I was able to pay my bills, travel a little and still have a few hundred left over at the end of the month. Today I am still paying my bills, travel has stopped and if I have a couple of hundred left at the end of the month it is because nothing broke down or wore out and had to be replaced. Something is going to have to give or I could be forced to seek employment in my old age and I am getting older every day. I am trying to hold on until I am 66 to draw what is coming to me.
After paying into SS for 16 years I have no faith in it ~ I now have a city job and pay into the state retirement plan instead of SS. I doubt I will ever see more than pennies on the dollar that I paid into SS and decided I need to invest in a better retirement plan instead of giving away my money ~ a 401k is also a great idea 🙂
After reading many posts I realized that SS is an insurance and I will tap into it only if I need to. If I have saved enough to sustain me through my retirement, I will not apply to get the benefits at all.
If enough people pledge to do the same for the sake of the less fortunate, Social Security need not go bankrupt at all.
@David, what would you like to have done with the trust fund surplus through the years? Would you just leave your SURPLUS savings in non interest bearing account for ever? That would be silly. So if you want to invest it, where would you invest? If you think about it, the safest investment for it would be US Government bonds isn’t it?
Social Security and its revenue partner, Federal INSURANCE Contributions Act taxes, are a mortgage place by this generation on the following generation. People used to sell their children as slaves. Now we just pawn them.
The idea that millions will starve if SS flops has no basis in history. People have been taking care of people for thousands of years. It doesn’t always work for everybody, but then neither does depending on government always work for everybody.
The big difference is that if this or that individual fails to care for that or this needy dependent, the impact is localized and individual, here and there. If government flops in taking care of the needy, millions will suddenly be needy simultaneously. When it does fail, Government failure is universal.
I’m 26, I already know that I will recieve nothing from SS when I retire. What I am upset about is the fact that I still have to pay in. Especially since SS is just used to fund entitlement programs now. Remember, at one time there was a huge surplus in the SS budget.
As others have said, we understand that people will be working and social security is a pay as you go system. But I’m soon to be a 35 year old and like most people my age or younger have said we don’t expect to get anything.
Here are a list of reasons why:
1) We’re already starting to pay out more than we take in.
2) People are living longer and will collect benefits longer
3) We’re lowering social security taxes and taking even less in with lots of baby boomers getting ready to retire in the near future.
4) Our govt. has been borrowing from social security to pay for well almost anything they can pay for and putting IOU’s back in. We all know the govt never changes their minds about IOU’s or programs in general.
5) Diminishing returns on investments or times when the economy goes into a recession.
My list could go on and on but my opinion is that at some point the strain on social security will be to much and the govt will cancel it or try to pay out people in some form. As the social security populations increase and decrease (ages 65-70, 70-80, 80-90, 90+) certain groups won’t put up with lowering and raising social security pay outs. Those that are 70-80 only get 75% but 65-70 get 85%. I just don’t see social security making it. Had the govt kept their hands out of the pot social security would be booming and it would act like a pension plan.
Truth be told, I am not near as worried about the downfall of SS as I am the collapse of our monetary system. If things keep going as they are now, the dollar will become worthless and so will those SS payments.
The problem I see with SS is that so many people come here when they are older (form another country) and have never worked here and get a SS check.. I know two seniors who get a monthly check who never worked a day in this country,( one hates my country) yet they get a check.. The man who hates my country, was a dentist in Switzerland. He now gets a pension check from Switzerland and gets a SS check from the good ole USA ! That is part of the problem. Please dont get me wrong,, my family immigrated here 100 years ago. .They landed on Ellis Island, worked until age 70 and then retired. I do not have a problem with legal immigrants who come here for a better life, and WORK and pay into the system. I do have a problem with persons who come here simply for the handouts..