Social Security

I promise to give you $1,000,000 in thirty years 🤑 Pretend I’m your Social Security

Yup, it’s a promise. One million in your bank account in 30-years. And to show you my sincerity I will start funding that promise now by putting money in an account for you.

2019 $50,000

2020 $100,000

2025 $200,000

2030 $100,000

2035 $0 (sorry, bad year can’t put any more in)

So, here’s the question. Does your account have a surplus of $450,000 or a shortfall and unfunded liability of $550,000 from the $1,000,000 I promised you?

The fact is I have not put in sufficient money to meet my promise to you. Even though there is $450,000 sitting in your account, it’s not extra money, it’s not to be used for something else, it’s toward your promised $1,000,000 which you won’t get unless I put more money in your account.

If you understand this simple example, you now understand Social Security.

There are people out there who claim Social Security has a surplus because there is $2.9 trillion sitting in the Trust, but you see, that money has been promised, it’s there to pay benefits already earned by Americans. Not only is there no surplus, but the Social Security system has a $13,000,000,000,000 (trillion) unfunded liability. That’s the present value of all promised benefits.

No, Social Security won’t run out of money as long as payroll taxes and other revenue keep being paid, but the trust will be gone and the interest income will be gone and just like in my example, Americans will not get 100% of what they were promised.

We need to move that declining line in the chart above to at least the $0 point and keep it there forever. To do that we must increase contributions (revenue to the trust) in some manner or lower the benefit promises made.

There are many ways to do either or both … the problem is we aren’t doing anything and all the while some politicians and advocate groups insist on misleading the American people.

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6 replies »

  1. If it had been left as a dedicated fund separate from the general budget, invested wisely what was left over from the current generation and not given away to those who NEVER put in; there would be enough for longer than what’s in it now. Both parties have been using Our money since 1965 and there is PROOF of that. in 2016 a bipartisan group with Lance stopped them from using it again. There is PROOF that it was used to set up and FUND the Peace Corp. What does that have to do with retired people and their families???? nothing. they should raise the FICA tax which is already there, take off the yearly limit, make Congress pay their share, Change their pension fund to SS, put in Term limits which won’t qualify for pension. Both parties have thought this was a POT OF GOLD. If they need to raise the age again for the next group, do so. one more year. With pensions being thrown out the window, medical plans being throw to the wind esp. with that Cadillac Tax of 18% per policy of the employers, folks can’t save like our parents were able to. Now they even have us over the barrel with TV. You HAVE to subscribe to something and pay for it. DTV, Direct, cable etc. it used to be free. Gas has increased to get around. Drugs have gone up even if they have been on the market for years. Property taxes have risen, utilities have gone up. Many have several part-time jobs now instead of one full time. They get NO benefits. Medicare has really increased in cost this past year. Then you have Ryan talking about taking money from Medicare to pay for the lousy tax bill that screws us in the NE. That was written into that bill when the first law was passed. In the 1970’s the South sent their Welfare clients with a one way fare up north. I met some of them back then. We had to support them.They didn’t want the employment office we directed them to; they wanted the unemployment office.

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    • That is not accurate. The trust earns over $80 billion a year in interest in the bonds it holds. Where would you have it invested where the principal is 100% guaranteed?

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    • Diane, you can still get free TV with an antenna. I get ABC, NBC, CBS, FOX, COZI, CW, GRIT TV, ION and 4 PBS with a $25 RCA indoor power antenna.

      BTW Congress has been paying into the SS system since 1985, most do not get anything but SS, if they do get a pension there is a government pension offset and equal amounts are deducted from their SS benefit.

      “Both parties have been using Our money since 1965″

      Diane it is not our money, almost all of the FICA tax goes out to pay benefits of current SS retirees in the year the tax was collected. Most people get everything that was paid in FICA taxes during their working years back in just 6 to 8 years. Who is paying for the benefits after age 75?

      Adjusted for inflation 55 cent per gallon gas in 1974 = $2.98 today. Average price of gas today is $2.67. It is 2.85 here in MT, but my sister in TX paid $2.12 yesterday.

      A $550 24 inch TV in 1974 adjusted for inflation = $2,980. My brother purchased an LG 55” 4K HDR TV for $479 at Sam’s Club in August.

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    • November’s AARP Bulletin, which just came in the mail today, has a special report on Social Security. It once agains tries to put the myth to death that Congress has robbed the trust fund to spend on other things. Congress has never done this. All 12 items discussed in the special report has been accurately covered in this blog since I have been reading it.

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  2. At first I thought you were writing about New Jersey’s unfunded pensions.

    Media does not help with providing accurate information on this subject either. On 11-9-18, USA Today ran an article titled: Why the Social Security Program Will Never Run Out of Cash, by Sean Williams, from The Motley Fool. The article is 100% true. It explains how the excessive cash will be exhaust and about how the worker to retiree ratio has decreased. However because the government collects taxes from the current workers Social Security will never run out of money. This is totally true.

    Reality is stated in one sentence at the bottom of the article which says that benefits may have to be cut to match the payroll tax income but Social Security will not go bankrupt. Totally true. It will always have some money coming into the fund.

    People will believe the headline but not read the whole article. Any other news report that is contrary to what they want to believe will be treated as fake news and disregarded. Even if someone reads the whole article they might miss the important meaning of the sentence that said that benefits might have to be cut to match incoming funds.

    The fact of the matter is if Social Security was a private insurance plan, regulators would have shut it down long ago for being a Ponzi scheme. A scheme promising large payouts funded by new investors.

    https://www.usatoday.com/story/money/2018/11/09/when-does-social-security-run-out/38452267/

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  3. Use of the word “earned” is a misnomer. Earned suggests “purchased” as in a contract, or wages. We, each of us, hasn’t earned anything when it comes to Social Security. It is implicit in the comment that ‘so long as payroll taxes continue’ or ‘to continue all benefits taxes must increase or benefits must be reduced or some combination.’

    The biggest lie is the word “earned”.

    We didn’t get even five years into the program before, starting with Ida Mae Fuller, politicians used the program to buy votes. That continues today – both D’s and R’s (see Bush II and Medicare Part D).

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