Social Security reform is a touchy subject these days for Thomas Brown and his grandparents.
"If I broach it with them, they are against any sort of legislation that would do anything to change Social Security," says Brown, a 28-year-old financial adviser with Pivot Point Advisors in Houston. "They depend on it, but when I look at my retirement plans, I don't factor it in. The new way of thinking is that Social Security won't be there -- you have to plan for your own retirement."
I write frequently about the future of Social Security, and pessimistic views like Brown's always show up in the comments below my stories. Indeed, Gallup reports that six out of ten pre-retirement Americans don't think Social Security will be able to pay them a benefit when they retire; those age 18-34 are even more pessimistic, with 76 percent saying they'll get nothing from the system.
The doubts aren't difficult to understand. "If you listen to any number of the news outlets, they'll tell you the system is going broke," says Brown. "Every year I get a mailing from Social Security detailing what I can expect in benefits, and they say themselves that it will be bankrupt around 2040 and that they are going to be paying out more than we're paying in. So it's not fear, it's math."
But Social Security isn't going bankrupt -- far from it. The system was intended -- and has always been -- a pay-as-you-go system, with taxes collected from workers used to pay current retirees. But Social Security also is sitting on a $2.5 trillion Social Security Trust Fund (SSTF) that has been stockpiled to fund the looming wave of baby boomer retirements; that fund is projected to be sufficient to pay benefits until about 2037.
Previously published at Reuters.
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* Social Security benefits are not gobbling up the U.S. economy. Benefits are equal to 4.9 percent of gross domestic product (GDP) this year, and will rise to just 6.2 percent in 2035, when all baby boomers will be 65 or older, according to last year’s Social Security trustees’ report. After 2035, Social Security expenditures are projected to stay around that percent of GDP through 2085, according to Virginia Reno, vice president for income security at the National Academy of Social Insurance.
* Social Security had a $2.5 trillion surplus in 2009, a number that will hit $3.8 trillion in 2020, according to the Economic Policy Institute. The surplus has been accumulating since implementation of the last Social Security reform measures in 1983.
http://blogs.reuters.com/deep-pocket/2010/07/27/selling-the-big-lie-on-social-security/
It doesn't matter it was "intended" as a pay-as-you-go system, because it's still a multi-generational Ponzi scheme. I want to see social security saved, but pretending it doesn't need to be saved will only postpone the inevitable, and make the ultimate collapse worse.
Failures of government "pay-as-you-go" systems are not unprecedented. West Virginia's state-run workers' compensation plan went broke, had to be privatized, and the citizens of the state had to pick up the bill for the workers' collecting disability payments and medical benefits. Washington State's state-run workers compensation system is staring at a $10 billion insolvency according to publicly released financial statements using generally accepted accounting principles, but they ignore the problem because they have $20 billion of investments (and $30 billion of debts).
This fraud on future generations must be fixed before it's too late.
Also other countries are not business minded. They will not put profit above all else like they do here. Many are used to socialism and will not like capitalism.
And the market can't continue going up each year. At some point it will have went up as much as it can. And the dividends will be divided by so many retirees that it won't be enough.
Social Security is a good program. There is no reason for Social Security to go broke as long as the government keeps its bargain to pay back our Social Security treasury bonds.
They have set Social Security up to fail, but we can do our best to succeed in keeping it strong for the next generations.
The only way it won't be there for the younger generations will be if they don't insist on having it. They want the younger generations to think it won't be there for them.
What then?
The Cons and their Wall Street friends are salivating over the idea of getting access to that 2+ trillion dollars.
Problem is a Currency/Bond/Derivitives problem no one wants to address. The Democrats remaining in control (I don't believe they will retain both houses) won't fix it. Nothing has been done in two years to fix the problems. Everything this admin and the previous admin has done have failed to address any of the core issues of Housing, Trade Surplus, Spending. While the Obama admin has tried to make people feel good, he has actually made it worse.
Inflation/Deflation debate is silly too. Hyperinflation is the end result due to lack of faith in the USD. SS, FERS, FED, China, Japan in that order are the largest holders of UST Bonds. See a problem when the US has to buy its own bonds?
There are many ways to buoy it up. Ex-president Bush's lament about not privatizing S.S. on his watch is the nations win. If, after going through one of the worst financial debacles since the Great Depression, there are people such as this guy, who still are pushing for putting this one thing working people can count on at risk, it is unbelievable, and, reprehensible. We know how vulnerable our 401Ks were. No thanks. S.S. is something everyone must know will always be there.
One way to bolster its viability is to continue the payroll deduction after the $106,000 cut off. It doesn't make sense to me that someone earning $60,000 a year never stops paying, yet, those making more than the $106,000 have a cut-off.
What is vulnerable and needs fixing is Medicare. This is a policy, along with S.S. that this country can, and should be proud of. But, it is Medicare that is running out of money and must be addressed. That is not to say abandon it, or eliminate it, as people tend to want to do, but fix it. We have a tendency in this country, if something is in trouble, throw it out. Wrong.
When Medicare was first proposed and then enacted, the for profit insurance companies had a hissie fit and only relented when Medicare was only available to the old and infirm, i.e. the highest risk customers the DIDN'T WANT!
Opening up Medicare to everyone opens the program to the LOW RISK customers the for profit insurance corporations want. Allowing the young to participate and add their 113 bucks a month to the fund - rather than wasting hundreds on the aforementioned for profit corporations - makes all the sense in the world!
Why should the insurance companies profit off the insurance for those over 65? It should be set up like Medicare is with Medicare not subsidizing the insurance companies. A Medicare prescription drug plan and a Medicare Medicap plan would do as much without bankrupting the health care of the elderly.