My Daily Kona: Social Security

Showing posts with label Social Security. Show all posts

Tuesday, December 19, 2023

"Young Americans Turn against Social Security"

I have been out of town visiting my mom up in Tennessee and was unable to post.

I saw the article and read it, and unfortunately, I tend to agree with it to an extent. I have been planning my retirement without Social Security in it despite my paying into it since the early 1980's. I believe that they will put a "means" test on it when it comes for me to retire since I have my own retirement, they will find a way to either cut my benefits or deny me completely because it wouldn't be fair for me to have extra money when others will not. The politicians have been kicking this can down the road since the 1970's and it took off especially in the 1990's with the proliferation of SSDI and "Crazy Checks". that were paid out if you could prove that your kid was "mentally challenged" and a lot of people saw this as an extra income stream and had their kids certified for the extra money. My attitude was and still is that if they had left it alone for the old people, the money would be fine, but they opened it up as a piggy bank for a bunch of other stuff and squandered it.

"Here is the Article"

Younger generations in the U.S., including millennials and Gen Zers, are much more likely to believe that the Social Security system needs reforming than those in their 60s and 70s.© Photo-illustration by Newsweek/Getty

The poll was conducted on December 8 among a sample population of 1,500 eligible voters in the U.S.

Some 40 percent of respondents said they believe that the Social Security program currently pays out more to retirees than it is receiving in Social Security tax payments, while 26 percent disagreed with this statement.

Millennials (those aged between 27 and 42), Gen Zers (those aged between 18 and 26), and Gen Xers (those aged between 43 and 58) were more likely than boomers (those older than 59 years old) to think that Social Security should be reformed.

According to the poll, 56 percent of Gen Zers, 76 percent of millennials and 69 percent of Gen Xers believed the system should be reformed, against 50 percent of boomers.

There were also overwhelmingly more millennials (52 percent) thinking that the system isn't getting as many tax payments as it was handing out benefits to retirees than any other generations, including Gen Z (39 percent), Gen X (25 percent) and boomers (39 percent).

"In general, millennials and plurals—our name for Gen Z—are skeptical that Social Security benefits as robust as those retirees like me currently enjoy will be available to them when they retire," Morley Winograd, author of three books on the millennial generation, told Newsweek.

"They have been told by Republicans in Congress, seconded by deficit hawks in think tanks, that the money will run out before they can claim it," he said. "None of that is true. But, luckily, the younger generation's skepticism of experts and politicians will help prevent the kind of unnecessary tinkering with future, never present, Social Security payments that some older folks advocate."

While boomers are the richest generations on the planet, millennials remain burdened by the debt "many of them incurred by paying excessive and economically unjustified tuition prices when we decided to make them the first generation in American history to have the majority of the burden of paying for higher education fall on them and their parents," Winograd said.

The older generation has on average a net worth 12 times higher than millennials, who are worth an average of $100,000.

What's the State of the Social Security Program?

Social Security is currently facing an uncertain future as it is expected to face a 23 percent across-the-board benefit cut in 2033, according to the Committee for a Responsible Federal Budget, unless something changes until then. For an average newly retired couple, that means $17,400 less.

Fixing the Social Security system is becoming an increasingly urgent issue, according to Richard Johnson, director of the Program on Retirement Policy at the Urban Institute, a Washington-based think tank, told Newsweek.

"By law, Social Security payments cannot exceed the program's resources. The program now pays out more in benefits than it collects in revenue," the expert said.

While the Social Security's trust fund is currently making up the difference, this trust fund is widely expected to run out by 2034. "When that happens, Social Security will be able to pay less than 80 percent of promised benefits," Johnson said, citing the conclusion reached by several experts.

"Unless policymakers fix Social Security's finances in the next 10 years, millions of retirees and people with disabilities would plunge into poverty."

For Johnson, the solution might involve cutting benefits or increasing taxes—a change that would be unpopular among retirees, but necessary. "Fixing Social Security sooner rather than later would share the pain of any benefit cuts or tax increases among more people, reducing the pain for later generations," Johnson said.

Winograd is a little more positive on the outlook of the program, saying that a resilient U.S. economy could keep Social Security afloat.

"Whether or not Social Security is able to maintain its current levels of payments or not depends on what assumptions you make about the performance of the U.S. economy in the future—an impossible thing to predict with any degree of accuracy," Winograd said.

"But, for instance, if the economy were to grow at the 5.2 percent rate GDP grew in the third quarter of this year, there would be no problem with Social Security benefits in the foreseeable future," he said.

"Of course, this is a difficult rate to sustain, but with disruptors like AI now starting to change the productivity rates of the U.S. economy in ways as profound as the internet and personal computing did in the go-go 1990s, there is no reason to believe that the U.S. economy won't continue to outperform the expectations of most economists, who are still waiting to see if the recession they forecasted for last year and the year before arrives," he added.

"And, besides, if the system does turn out to need more money, it can be quickly and equitably raised by simply removing the income cap on paying Social Security taxes, which is one of the more egregious regressive elements of our current tax laws and very unpopular with young voters now flooding the electorate."

Tuesday, September 12, 2023

Did Congress Steal from the Social Security Fund?

I saw this from the "Motley Fool", they do a lot of financial stuff and normally to me are apolitical or as politically neutral in these times anyway.

I always had believed 2 things one. To finance both the war in Vietnam and the "Great Society Programs" he had his minions in congress raid the Social Security fund to hide the true cost of both from the American people and pack it with "IOU's" so the cost wasn't readily apparent. The second one is that if they kept those that never paid into the system from drawing from it, there wouldn't be an insolvency issues. I also believe that by the time I retire, there will be an "Means Test" and since I scrimped my present to fund my future, I will be ineligible to draw from what I call that great "Ponzi" What I mean is that if anybody ran SS like the government ran it, they would be in jail.

Among America's numerous social programs, none lifts more people out of poverty each year than Social Security. As of 2021, the Center on Budget and Policy Priorities estimates that 21.75 million people, including nearly 15.4 million seniors aged 65 and over, were being lifted above the federal poverty line due to their monthly Social Security benefit.

Unfortunately, this vital program that provides benefits to approximately 66.7 million people each month -- 49.6 million of which are retired workers -- finds itself on shaky ground.

A businessperson crossing their fingers behind their back while holding a stack of one hundred dollar bills.© Getty Images

The 2023 Social Security Board of Trustees Report estimates that America's top retirement program is facing a funding obligation shortfall of a whopping $22.4 trillion through 2097. In plain English, the Trustees believe the Social Security program won't collect enough revenue to meet outlay obligations (benefits and administrative expenses) over the next 75 years.

What's more, the Trustees Report estimates that the asset reserves -- the excess revenue collected since inception -- of the Old-Age and Survivors Insurance Trust Fund (OASI) could be exhausted by as early as 2033. Should this happen, sweeping benefits cuts of up to 23% may be necessary for retired workers and survivor beneficiaries to sustain their payouts through 2097 without the need for any additional reductions.

It's not the rosiest of outlooks for a program that's crucial to the financial well-being of our nation's retired workers. However, the reason(s) behind this $22.4 trillion long-term funding obligation shortfall may not be what you think.

Has Congress pilfered trillions of dollars from Social Security's coffers?

Just as the sun rising in the Eastern sky every day is a fundamental truth, every prominent Social Security article on the internet with a comments section is destined to be filled with claims that the program's shaky foundation is the result of "Congress stealing trillions from Social Security and not paying interest on what they've taken."

This thesis claims that if Congress were to return the trillions they've taken, with interest, Social Security would no longer be facing a budgetary shortfall. But is there any truth to these claims?

The very direct answer is no.

When Social Security was signed into law in the mid-1930s, it required that the program's asset reserves be invested in special-issue bonds and certificates of indebtedness. In other words, all excess revenue that isn't being disbursed to eligible beneficiaries is invested in super safe government bonds that bear an interest rate that generates the program interest income.

Does the government use the money it receives from these bonds for various line items, including spending on defense, education, healthcare, and so on? Absolutely. But has this money been "stolen" by Congress? Nope. Every cent is accounted for via the bonds and certificates of indebtedness.

US Old-Age, Survivors, and Disability Insurance Trust Fund Assets at End of Year

In fact, the Social Security Administration publicly updates its portfolio of investment holdings each month. As of the end of July 2023, the program held $2,856,838,557,000 in asset reserves, with an average interest rate of 2.396%. Extrapolated out 12 months using 2.396% as the average interest rate would yield $68.45 billion in net interest income for Social Security.

Let me offer a more relatable way you can think about how Social Security treats its asset reserves. Imagine you have $1,000 in cash in your pocket and you deposit this cash at your local bank. Your bank has no intention of sitting on this cash and letting it collect dust. Rather, it's going to use your cash, along with the cash of other depositors, to generate interest income and/or make loans. The bank hasn't stolen your deposit, and your $1,000 is there anytime you want to take some or all of it out.

The same premise holds true for Social Security. The U.S. government is responsible for making interest payments to the program, and every previous bond maturity throughout history has been repaid in full. Nothing has been stolen; interest is being paid; and not a penny is missing.

As one final note, if, hypothetically speaking, the government were forced to repay its nearly $2.86 trillion in outstanding bonds and certificates of indebtedness, Social Security would miss out on tens of billons in annual interest income. In short, it would be in far worse financial shape with its excess cash simply collecting dust in the proverbial vault and losing purchasing power to steadily rising prices for goods and services.

A person holding a Social Security card between their thumb and index finger.

Here are the real reasons Social Security's foundation is buckling

The idea of Congress stealing from Social Security and not paying interest is a complete myth. There are, however, tangible reasons for Social Security's struggles, many of which can be tied to long-running demographic shifts.

To begin with, the U.S. fertility rate has effectively fallen to a record low. The "fertility rate" describes the number of births a woman would be expected to have over her lifetime. As recently as 2007, this figure was above 2. By 2021, the U.S fertility rate had dropped more than 20% from where it stood in 2007.

The reasons behind fewer U.S. births are many and include, couples waiting longer to get married, fewer unplanned pregnancies, better access to contraceptives, and even economic uncertainty (e.g., the Great Recession and COVID-19 pandemic). Fewer people in the workforce a generation from now means an even lower worker-to-beneficiary ratio for Social Security.

A more-than-halving in net immigration into the U.S. is another key problem for Social Security. Legal immigrants tend to be younger, and therefore spend decades in the labor force generating much-needed payroll tax revenue for the program. But over the past quarter of a century, net legal immigration has declined by 57%.

Also, to take another myth off the table, undocumented workers positively contribute to Social Security via the payroll tax, but are ineligible to receive a penny back in traditional benefits.

Income inequality is another front-and-center issue for Social Security. In 2023, all earned income (wages and salary, but not investment income) between $0.01 and $160,200 is subject to the 12.4% payroll tax that's responsible for funding Social Security. Approximately 94% of working Americans won't reach $160,200 in earnings this year, which means they'll pay tax into Social Security on every dollar they earn.

By comparison, earned income above $160,200 is exempt from the payroll tax. In 1984, 91% of all earned income was subject to the payroll tax. But as of 2021, only 81% of earned income was being hit with the 12.4% payroll tax. In other words, more earned income is "escaping" the payroll tax as time passes.

Congressional inaction can be added to this list, as well. The longer lawmakers wait to act, the larger Social Security's funding obligation shortfall grows, and the more painful the eventual solution is going to be on working Americans and retirees.

There's no question that Social Security has issues to contend with. The myth that Congress has its hand in Social Security's cookie jar simply isn't one of them.

Webster