U.S Social Security, an entitlement?

[willyumiii]

I recently posted a thread asking for advice about filing for my social security benefits and received a lot of good information...Thanks for that!

As always ,on TV, there were a few who just couldn't stay focused and stay on topic.

Some wanted to talk about how the U,S, government starting using S.S. money for other things ( I believe under the guidance of Reagan and his Republican clan)and have depleted the reserves of S.S.

Many of the same Reagan Republicans refer to S.S. benefits as an "entitlement" insinuating it is some sort of charity, relief, or welfare program.

Both interesting topics for a new thread I believe.

My feeling is that yes, I am entitled to my S.S. benefits!

I am entitled to them like I am entitled to a bag of groceries that I have paid for!

For over 50 years, I paid into the S.S. system as an investment for the later years in life when I will no longer earn a good income!

Now I feel I am "entitled " to start collecting on my investment.

AS far as the government using S.S. moneys for other purposes,

I think it is theft and those responsible should be prosecuted and forced to replace the money.

I am the first to admit that I am not an expert on the history of social security or in a position to predict it's future.

Are you?

What do you know about it and what are your feelings about it's past , future and the whole "entitlement" issue?

[mesquite]

I think SS should be called an "earned entitlement" as opposed to entitlement.

[sdanielmcev]

I'm not saying bad, but SS is a Ponzi scheme. The money you pay in pays somebody else that same year. A trust was established, sort of a minimum expenditure/holding that contains no real assets, only a promise to pay.

Yes,any money paid out by the government that you didn't earn is an entitlement.

Money collected from wage earners is sent to the general fund, not specific to the SS trust.

It was never meant to be an investment fund, but a security net for those unable to work.

[Ulysses G.]

My guess is that you want to start a thread to bash Republicans since both sides have used the SS money for other things and both sides call SS an entitlement. This is the wrong forum though.

You need to figure out how to slide your way into commenting on something on the World News Forum where it might be vaguely on topic. You will have lots of help trashing the Republican there.

[sdanielmcev]

Oh, and LBJ paid for the Vietnam war with SS funds.

[metisdead]

Moved to the Home Country Forum.

[willyumiii]

My guess is that you want to start a thread to bash Republicans since both sides have used the SS money for other things and both sides call SS an entitlement. This is the wrong forum though.

You need to figure out how to slide your way into commenting on something on the World News Forum where it might be vaguely on topic. You will have lots of help trashing the Republican there.

The reason I mentioned The Republicans is that in my previous thread about SS, one of the off topic ranters had a pretty long post about how it was Reagan who started depleting the funds for other purposes.

True or not, I do not know.

I did state that I was not an expert on S.S. history and was looking for input from those who know more than I.

As for my dislike of republicans...

I do not dislike them any more than I do the Democrats.

It's really one party with two faces...isn't it?

[Loptr]

Oh, and LBJ paid for the Vietnam war with SS funds.

And when he ran out of $$$, Nixon took the US off the gold standard in 1971 so the US could print more $$$ to fund the farce that was Vietnam...

LBJ's Great Society program has cost an estimated $23 trillion USD since it's inception and what does the US have to show for it? A government-dependent underclass that defines the word "entitlement beneficiaries"...

SS is a paid entitlement, something the FSA crew would know nothing about... The amortization tables for benefits are based on 1940's data where life expectancies were much lower... Today we have retirees living into their 90's, which exacerbates the problem... SS is fully funded until 2037... After that date, benefits will have to be reduced...

The answer is for the US to simply charge the Federal Reserve 0.06% interest on every USD they create out of thing air... Hell, the Fed makes 6.0% on every dollar they create, so a measly 0.06% would hurt them, much, but the impact on the US economy would be enormous... Better yet, do away with the Federal Reserve entirely and the US could do away with income tax and fully fund it's bloated budget, but we know that will never happen...

[Loptr]

My guess is that you want to start a thread to bash Republicans since both sides have used the SS money for other things and both sides call SS an entitlement. This is the wrong forum though.

You need to figure out how to slide your way into commenting on something on the World News Forum where it might be vaguely on topic. You will have lots of help trashing the Republican there.

The reason I mentioned The Republicans is that in my previous thread about SS, one of the off topic ranters had a pretty long post about how it was Reagan who started depleting the funds for other purposes.

True or not, I do not know.

I did state that I was not an expert on S.S. history and was looking for input from those who know more than I.

As for my dislike of republicans...

I do not dislike them any more than I do the Democrats.

It's really one party with two faces...isn't it?10353192_851002651599484_7716881104291857807_n.jpg

Reagan sold out to Wall Street to get the US out of recession... Just check the ramp in US debt after he took office...

Read the book "The Man That Sold Out the World" for a better perspective...

http://www.thenation.com/article/158321/reagans-real-legacy

My posts might give some the impression that I'm a Republican... Nothing could be further from the truth as I hold both parties with equal disdain... They have both screwed the pooch since WWII and it galls my a## to think were the world would be today without all the paranoid power-hungry psychopaths that rule the world...

[nuananddon]

Politicians can't stand seeing money just sitting around when they can blow it on some type of vote grabbing scheme they dream up. True, SS has been the victim of both parties skimming money out of it. Also there are numberous people getting a check every month that have not contributed one dime into SS. Example, a woman we know who lives in the next village(Thailand) whose children live in the USA, gets SS because she lived with them on and off for a few years just so they could call her a resident, signed her up and bingo gets a SS check every month, now crap like that really jacks my jaws, she now lives full time back in thailand. Now multiply that by tens of thousands and you can see why the monies not going to be there in a few years. Just one of my pet peives I guess.

[thailiketoo]

Welfare or the dole is money given to a person who is not working. SS in the vast majority of the cases is money that has been paid in by the recipient for 40 quarters. In some cases in other countries the dole finances dead beats; for the large majority Social Security has been paid for by the person drawing the money in old age. Why Willy would want to start a thread where hard working old folks from America will get bashed by the nanny staters and America bashers who think it is a Ponzi scheme is beyond me.

I have a friend from another country who has got money all his life because he is an alcoholic. He is a drunk and his country pays him for it. No, that is not Social Security.

But I think Willy as a new Social Security recipient and recipient of much good advice that you do us all a disservice by opening all of us up to the abuse which will follow this topic.

Edited November 22, 2014 by thailiketoo

[MisterTee]

My guess is that you want to start a thread to bash Republicans since both sides have used the SS money for other things and both sides call SS an entitlement. This is the wrong forum though.

You need to figure out how to slide your way into commenting on something on the World News Forum where it might be vaguely on topic. You will have lots of help trashing the Republican there.

The reason I mentioned The Republicans is that in my previous thread about SS, one of the off topic ranters had a pretty long post about how it was Reagan who started depleting the funds for other purposes.

True or not, I do not know.

I did state that I was not an expert on S.S. history and was looking for input from those who know more than I.

As for my dislike of republicans...

I do not dislike them any more than I do the Democrats.

It's really one party with two faces...isn't it?10353192_851002651599484_7716881104291857807_n.jpg

Agree that both parties dipped in... but it was Mr.B.J.Clinton aka Slick Willie that really gutted it.

Do some research, it's a fact.

[willyumiii]

My guess is that you want to start a thread to bash Republicans since both sides have used the SS money for other things and both sides call SS an entitlement. This is the wrong forum though.

You need to figure out how to slide your way into commenting on something on the World News Forum where it might be vaguely on topic. You will have lots of help trashing the Republican there.

The reason I mentioned The Republicans is that in my previous thread about SS, one of the off topic ranters had a pretty long post about how it was Reagan who started depleting the funds for other purposes.

True or not, I do not know.

I did state that I was not an expert on S.S. history and was looking for input from those who know more than I.

As for my dislike of republicans...

I do not dislike them any more than I do the Democrats.

It's really one party with two faces...isn't it?10353192_851002651599484_7716881104291857807_n.jpg

Agree that both parties dipped in... but it was Mr.B.J.Clinton aka Slick Willie that really gutted it.

Do some research, it's a fact.

"It was Joe Blow who did it! Do some research, it's fact"

Pretty weak Mister Tee

If you are going to click the reply button, don't just call people names.

Supply some facts to support your statement of disgust.

Either contribute to the forum, or don't bother replying Mister!

This is a free forum.

You do not get charged by the key stroke!

Geeeeezzz!

Edited November 22, 2014 by willyumiii

[NeverSure]

In the respect that one draws a lot more from SS than he would had he paid the same amount into a private pension fund, and in the respect that recipients get cost of living increases, it is an unearned entitlement.

If there had been a solid trust fund invested even in Treasuries drawing interest, and recipients were paid only their share of that based on what was paid in, then it would be money owed.

SS is the best retirement investment the average person can get. An exception of course is the outrageous government employee pensions some get.

Will the government run out of money and stop paying? That's a joke of course. How many voters receive SS and how far down in hell would the politicians land if they cut it off?

At the worst they would print the money, depreciating everyone's money and keep paying. Then there would be another round of inflation followed by cost of living increases ad nauseum.

Looking at the actuarials, it is solvent until long after I'm dead.

[BKKSnowBird]

OP. Are you the guy who is 62 with a 6 year old who will also collect SS?

I think only people who are disabled should qualify for dependent pay. That is what insurance is for. I dont think the government should have to support your kid until 18 because you retired. Just my opinion and why the system is going broke.

Edited November 22, 2014 by BKKSnowBird

[CaptHaddock]

Whenever Social Security comes up out trot all the same old misconceptions every time.

1. SS is not a Ponzi scheme. A ponzi scheme is theft masquerading as investment. Early "investors" are sometimes repaid with the money collected from later "investors" as a tactic to keep the scheme running as long as possible, but all ponzi schemes collapse eventually because the "investors" can never be repaid since the organizer has stolen the money as he always intended to do.

SS is designed as an insurance program. When we buy insurance of any kind we are deciding to pay a company to accept a risk from us that we are not willing or able to bear ourselves. So, if we buy fire insurance on the house, it is because we could not afford to replace the house if it were to burn down. The insurance company agrees to replace the house for us if it burns down in exchange for a premium that we pay, which is much less than the cost of replacing the house. The insurance company can afford to accept this risk because most houses don't burn down, not because it is a ponzi scheme. Similarly, the SSA knows from very accurate actuarial tables how much it will have to pay out to its pool of beneficiaries, few of whom will live to be 100.

Notice that recovering the premium paid in the future is not the goal of the insurance customer. In this way buying insurance differs from making an investment, in which we always hope and expect to receive back more than our original investment.

By participating in SS, even if we actually had no choice in the matter, we are paying the Social Security Administration, organized by the federal govt, to accept our longevity risk, which is, the financial risk of our old age which could be long and ruinously expensive. The SS system drastically reduced old age poverty in America after it was introduced in 1935. If we did not have the SS insurance program each one of us would have to save a huge percentage of his income against the possibility of living to be 100 even though few of would actually live that long. This is the current situation of households in China who have no SS system. Estimates of the savings rate of Chinese households range from 25% to 48%.

2. Payroll taxes collected for SS have not been "stolen" or "spent" by the federal govt so that they won't be able to pay our benefits when they come due. As I discussed in the other thread, the SS Trust Fund was created by the Greenspan Commission in 1983 to reform SS to keep it solvent. The Commission created the Trust Fund by raising the payroll tax to collect funds in anticipation of the increased demand that would occur when the baby boomer generation retires. The purpose of the Trust Fund was to fund the baby boomers and be exhausted in the process. Prior to the Greenspan Commission reforms, the SS system was pay-as-you-go, i.e. the money collected this year was used to pay benefits in the same year.

Congress mandated that monies held in the Trust Fund be used to buy US Treasury obligations guaranteed by the full faith and credit of the US. This was certainly the correct choice. Where else could the money be invested? In the stock market which had a loss of 57% in 2008? The US Treasury pays interest on the special Treasury bonds in the Trust Fund. Last year that interest amounted to $98 billion. Currently, the SSA uses some of the interest to pay current benefits while the rest is added to the Trust Fund. By 2022 it is expected that the SSA will use all of the interest each year and start to use the principal of the Trust Fund.

3. The SS system is not broke. According to current projections, without any reforms, the $2.7 trillion dollar Trust Fund will be exhausted by 2034. At that point the SSA will be able to continue to pay 77% of planned benefits using the payroll tax alone without the Trust Fund. The benefits planned for 2033 will be higher than those paid today even after accounting for inflation. This scenario might not happen at all however. If the growth rate of GDP is higher than expected (but still lower than during the entire postwar period) the resulting increase in payroll taxes would mean that the Trust Fund would never be depleted. We don't know what the growth rate of GDP will be in the future. So, the Trustees of the SS consider three scenarios each year each of which projects out 75 years into the future. By contrast the Defense Dept, and indeed all other govt departments, are only funded through the current fiscal year. Nevertheless, the world bond market and I all expect that the US Treasury will make full payment on all of its obligations including US Treasury bonds, bills, and notes, special bonds, military pensions, etc.

Both the payroll tax contributions to SS and SS benefit payments have been modified in the past and may well be modified in the future. The reduction in benefits that might occur in 2034 can be avoided by increasing the payroll tax now by about 2% or by removing the $117,000 cap on the payroll tax completely or by taxing income that is not currently subject to the payroll tax, such as dividends, interest, or capital gains.

For most US retirees the present value of the their SS annuity is by far the biggest asset they have. I pointed out in the earlier thread that the OP's SS benefits might be worth as much as one million dollars to him depending on several factors including whether he delays receiving benefits or not. For many SS recipients the decision whether to delay SS benefits is much more important financially than any investment decision they are likely to face. If you do not understand the issues involved you would be well advised to learn about it thoroughly.

[willyumiii]

Whenever Social Security comes up out trot all the same old misconceptions every time.

1. SS is not a Ponzi scheme. A ponzi scheme is theft masquerading as investment. Early "investors" are sometimes repaid with the money collected from later "investors" as a tactic to keep the scheme running as long as possible, but all ponzi schemes collapse eventually because the "investors" can never be repaid since the organizer has stolen the money as he always intended to do.

SS is designed as an insurance program. When we buy insurance of any kind we are deciding to pay a company to accept a risk from us that we are not willing or able to bear ourselves. So, if we buy fire insurance on the house, it is because we could not afford to replace the house if it were to burn down. The insurance company agrees to replace the house for us if it burns down in exchange for a premium that we pay, which is much less than the cost of replacing the house. The insurance company can afford to accept this risk because most houses don't burn down, not because it is a ponzi scheme. Similarly, the SSA knows from very accurate actuarial tables how much it will have to pay out to its pool of beneficiaries, few of whom will live to be 100.

Notice that recovering the premium paid in the future is not the goal of the insurance customer. In this way buying insurance differs from making an investment, in which we always hope and expect to receive back more than our original investment.

By participating in SS, even if we actually had no choice in the matter, we are paying the Social Security Administration, organized by the federal govt, to accept our longevity risk, which is, the financial risk of our old age which could be long and ruinously expensive. The SS system drastically reduced old age poverty in America after it was introduced in 1935. If we did not have the SS insurance program each one of us would have to save a huge percentage of his income against the possibility of living to be 100 even though few of would actually live that long. This is the current situation of households in China who have no SS system. Estimates of the savings rate of Chinese households range from 25% to 48%.

2. Payroll taxes collected for SS have not been "stolen" or "spent" by the federal govt so that they won't be able to pay our benefits when they come due. As I discussed in the other thread, the SS Trust Fund was created by the Greenspan Commission in 1983 to reform SS to keep it solvent. The Commission created the Trust Fund by raising the payroll tax to collect funds in anticipation of the increased demand that would occur when the baby boomer generation retires. The purpose of the Trust Fund was to fund the baby boomers and be exhausted in the process. Prior to the Greenspan Commission reforms, the SS system was pay-as-you-go, i.e. the money collected this year was used to pay benefits in the same year.

Congress mandated that monies held in the Trust Fund be used to buy US Treasury obligations guaranteed by the full faith and credit of the US. This was certainly the correct choice. Where else could the money be invested? In the stock market which had a loss of 57% in 2008? The US Treasury pays interest on the special Treasury bonds in the Trust Fund. Last year that interest amounted to $98 billion. Currently, the SSA uses some of the interest to pay current benefits while the rest is added to the Trust Fund. By 2022 it is expected that the SSA will use all of the interest each year and start to use the principal of the Trust Fund.

3. The SS system is not broke. According to current projections, without any reforms, the $2.7 trillion dollar Trust Fund will be exhausted by 2034. At that point the SSA will be able to continue to pay 77% of planned benefits using the payroll tax alone without the Trust Fund. The benefits planned for 2033 will be higher than those paid today even after accounting for inflation. This scenario might not happen at all however. If the growth rate of GDP is higher than expected (but still lower than during the entire postwar period) the resulting increase in payroll taxes would mean that the Trust Fund would never be depleted. We don't know what the growth rate of GDP will be in the future. So, the Trustees of the SS consider three scenarios each year each of which projects out 75 years into the future. By contrast the Defense Dept, and indeed all other govt departments, are only funded through the current fiscal year. Nevertheless, the world bond market and I all expect that the US Treasury will make full payment on all of its obligations including US Treasury bonds, bills, and notes, special bonds, military pensions, etc.

Both the payroll tax contributions to SS and SS benefit payments have been modified in the past and may well be modified in the future. The reduction in benefits that might occur in 2034 can be avoided by increasing the payroll tax now by about 2% or by removing the $117,000 cap on the payroll tax completely or by taxing income that is not currently subject to the payroll tax, such as dividends, interest, or capital gains.

For most US retirees the present value of the their SS annuity is by far the biggest asset they have. I pointed out in the earlier thread that the OP's SS benefits might be worth as much as one million dollars to him depending on several factors including whether he delays receiving benefits or not. For many SS recipients the decision whether to delay SS benefits is much more important financially than any investment decision they are likely to face. If you do not understand the issues involved you would be well advised to learn about it thoroughly.

Excellent Post!

I was hoping you would contribute CaptHaddock.

It seems you are very well informed on the topic.

Thank You,

The OP

[geodesic]

Whenever Social Security comes up out trot all the same old misconceptions every time.

1. SS is not a Ponzi scheme. A ponzi scheme is theft masquerading as investment. Early "investors" are sometimes repaid with the money collected from later "investors" as a tactic to keep the scheme running as long as possible, but all ponzi schemes collapse eventually because the "investors" can never be repaid since the organizer has stolen the money as he always intended to do.

SS is designed as an insurance program. When we buy insurance of any kind we are deciding to pay a company to accept a risk from us that we are not willing or able to bear ourselves. So, if we buy fire insurance on the house, it is because we could not afford to replace the house if it were to burn down. The insurance company agrees to replace the house for us if it burns down in exchange for a premium that we pay, which is much less than the cost of replacing the house. The insurance company can afford to accept this risk because most houses don't burn down, not because it is a ponzi scheme. Similarly, the SSA knows from very accurate actuarial tables how much it will have to pay out to its pool of beneficiaries, few of whom will live to be 100.

Notice that recovering the premium paid in the future is not the goal of the insurance customer. In this way buying insurance differs from making an investment, in which we always hope and expect to receive back more than our original investment.

By participating in SS, even if we actually had no choice in the matter, we are paying the Social Security Administration, organized by the federal govt, to accept our longevity risk, which is, the financial risk of our old age which could be long and ruinously expensive. The SS system drastically reduced old age poverty in America after it was introduced in 1935. If we did not have the SS insurance program each one of us would have to save a huge percentage of his income against the possibility of living to be 100 even though few of would actually live that long. This is the current situation of households in China who have no SS system. Estimates of the savings rate of Chinese households range from 25% to 48%.

2. Payroll taxes collected for SS have not been "stolen" or "spent" by the federal govt so that they won't be able to pay our benefits when they come due. As I discussed in the other thread, the SS Trust Fund was created by the Greenspan Commission in 1983 to reform SS to keep it solvent. The Commission created the Trust Fund by raising the payroll tax to collect funds in anticipation of the increased demand that would occur when the baby boomer generation retires. The purpose of the Trust Fund was to fund the baby boomers and be exhausted in the process. Prior to the Greenspan Commission reforms, the SS system was pay-as-you-go, i.e. the money collected this year was used to pay benefits in the same year.

Congress mandated that monies held in the Trust Fund be used to buy US Treasury obligations guaranteed by the full faith and credit of the US. This was certainly the correct choice. Where else could the money be invested? In the stock market which had a loss of 57% in 2008? The US Treasury pays interest on the special Treasury bonds in the Trust Fund. Last year that interest amounted to $98 billion. Currently, the SSA uses some of the interest to pay current benefits while the rest is added to the Trust Fund. By 2022 it is expected that the SSA will use all of the interest each year and start to use the principal of the Trust Fund.

3. The SS system is not broke. According to current projections, without any reforms, the $2.7 trillion dollar Trust Fund will be exhausted by 2034. At that point the SSA will be able to continue to pay 77% of planned benefits using the payroll tax alone without the Trust Fund. The benefits planned for 2033 will be higher than those paid today even after accounting for inflation. This scenario might not happen at all however. If the growth rate of GDP is higher than expected (but still lower than during the entire postwar period) the resulting increase in payroll taxes would mean that the Trust Fund would never be depleted. We don't know what the growth rate of GDP will be in the future. So, the Trustees of the SS consider three scenarios each year each of which projects out 75 years into the future. By contrast the Defense Dept, and indeed all other govt departments, are only funded through the current fiscal year. Nevertheless, the world bond market and I all expect that the US Treasury will make full payment on all of its obligations including US Treasury bonds, bills, and notes, special bonds, military pensions, etc.

Both the payroll tax contributions to SS and SS benefit payments have been modified in the past and may well be modified in the future. The reduction in benefits that might occur in 2034 can be avoided by increasing the payroll tax now by about 2% or by removing the $117,000 cap on the payroll tax completely or by taxing income that is not currently subject to the payroll tax, such as dividends, interest, or capital gains.

For most US retirees the present value of the their SS annuity is by far the biggest asset they have. I pointed out in the earlier thread that the OP's SS benefits might be worth as much as one million dollars to him depending on several factors including whether he delays receiving benefits or not. For many SS recipients the decision whether to delay SS benefits is much more important financially than any investment decision they are likely to face. If you do not understand the issues involved you would be well advised to learn about it thoroughly.

Excellent Post!

I was hoping you would contribute CaptHaddock.

It seems you are very well informed on the topic.

Thank You,

The OP

I love these types of arguments.

"I am not broke. I loaned all my money to my wife, who spent it on shoes. Look, I have a note from my wife that promises to pay me back!"

"But your wife doesn't have a job. Isn't your wife's only way of paying you back from money that you earn?"

"Yes...what's your point? I have a note..."

Ignorning all the government accounting foolery that treats the SS fund as somehow different from the general fund, here is the real truth (borrowed and paraphrased):

It is a fact that the SS Trust 'loans' the trust fund to the US government.

It is also a fact that the interest payed back to the trust fund comes from the US government; i.e., income taxes.

The reality of the SS trust, without the 'spin', is that right now, the contributions and interest are greater than distributions. Just a few years ago, contributions alone were greater than distributions. In a year or so, contributions and interest will not be greater than distributions.

That is the story of an account with a bad future.

Social security is going broke. End of story. In a few years, contributions will need to be raised, benefits will need to be reduced, taxes will be increased, or a combination of all 3 will need to happen.

So no, social security is not broke...yet. But it will be before those of us in our 30's and 40's make it there. No getting around that. It is a hidden tax that should be scrapped now.

[willyumiii]

Whenever Social Security comes up out trot all the same old misconceptions every time.

1. SS is not a Ponzi scheme. A ponzi scheme is theft masquerading as investment. Early "investors" are sometimes repaid with the money collected from later "investors" as a tactic to keep the scheme running as long as possible, but all ponzi schemes collapse eventually because the "investors" can never be repaid since the organizer has stolen the money as he always intended to do.

SS is designed as an insurance program. When we buy insurance of any kind we are deciding to pay a company to accept a risk from us that we are not willing or able to bear ourselves. So, if we buy fire insurance on the house, it is because we could not afford to replace the house if it were to burn down. The insurance company agrees to replace the house for us if it burns down in exchange for a premium that we pay, which is much less than the cost of replacing the house. The insurance company can afford to accept this risk because most houses don't burn down, not because it is a ponzi scheme. Similarly, the SSA knows from very accurate actuarial tables how much it will have to pay out to its pool of beneficiaries, few of whom will live to be 100.

Notice that recovering the premium paid in the future is not the goal of the insurance customer. In this way buying insurance differs from making an investment, in which we always hope and expect to receive back more than our original investment.

By participating in SS, even if we actually had no choice in the matter, we are paying the Social Security Administration, organized by the federal govt, to accept our longevity risk, which is, the financial risk of our old age which could be long and ruinously expensive. The SS system drastically reduced old age poverty in America after it was introduced in 1935. If we did not have the SS insurance program each one of us would have to save a huge percentage of his income against the possibility of living to be 100 even though few of would actually live that long. This is the current situation of households in China who have no SS system. Estimates of the savings rate of Chinese households range from 25% to 48%.

2. Payroll taxes collected for SS have not been "stolen" or "spent" by the federal govt so that they won't be able to pay our benefits when they come due. As I discussed in the other thread, the SS Trust Fund was created by the Greenspan Commission in 1983 to reform SS to keep it solvent. The Commission created the Trust Fund by raising the payroll tax to collect funds in anticipation of the increased demand that would occur when the baby boomer generation retires. The purpose of the Trust Fund was to fund the baby boomers and be exhausted in the process. Prior to the Greenspan Commission reforms, the SS system was pay-as-you-go, i.e. the money collected this year was used to pay benefits in the same year.

Congress mandated that monies held in the Trust Fund be used to buy US Treasury obligations guaranteed by the full faith and credit of the US. This was certainly the correct choice. Where else could the money be invested? In the stock market which had a loss of 57% in 2008? The US Treasury pays interest on the special Treasury bonds in the Trust Fund. Last year that interest amounted to $98 billion. Currently, the SSA uses some of the interest to pay current benefits while the rest is added to the Trust Fund. By 2022 it is expected that the SSA will use all of the interest each year and start to use the principal of the Trust Fund.

3. The SS system is not broke. According to current projections, without any reforms, the $2.7 trillion dollar Trust Fund will be exhausted by 2034. At that point the SSA will be able to continue to pay 77% of planned benefits using the payroll tax alone without the Trust Fund. The benefits planned for 2033 will be higher than those paid today even after accounting for inflation. This scenario might not happen at all however. If the growth rate of GDP is higher than expected (but still lower than during the entire postwar period) the resulting increase in payroll taxes would mean that the Trust Fund would never be depleted. We don't know what the growth rate of GDP will be in the future. So, the Trustees of the SS consider three scenarios each year each of which projects out 75 years into the future. By contrast the Defense Dept, and indeed all other govt departments, are only funded through the current fiscal year. Nevertheless, the world bond market and I all expect that the US Treasury will make full payment on all of its obligations including US Treasury bonds, bills, and notes, special bonds, military pensions, etc.

Both the payroll tax contributions to SS and SS benefit payments have been modified in the past and may well be modified in the future. The reduction in benefits that might occur in 2034 can be avoided by increasing the payroll tax now by about 2% or by removing the $117,000 cap on the payroll tax completely or by taxing income that is not currently subject to the payroll tax, such as dividends, interest, or capital gains.

For most US retirees the present value of the their SS annuity is by far the biggest asset they have. I pointed out in the earlier thread that the OP's SS benefits might be worth as much as one million dollars to him depending on several factors including whether he delays receiving benefits or not. For many SS recipients the decision whether to delay SS benefits is much more important financially than any investment decision they are likely to face. If you do not understand the issues involved you would be well advised to learn about it thoroughly.

Excellent Post!

I was hoping you would contribute CaptHaddock.

It seems you are very well informed on the topic.

Thank You,

The OP

I love these types of arguments.

"I am not broke. I loaned all my money to my wife, who spent it on shoes. Look, I have a note from my wife that promises to pay me back!"

"But your wife doesn't have a job. Isn't your wife's only way of paying you back from money that you earn?"

"Yes...what's your point? I have a note..."

Ignorning all the government accounting foolery that treats the SS fund as somehow different from the general fund, here is the real truth (borrowed and paraphrased):

It is a fact that the SS Trust 'loans' the trust fund to the US government.

It is also a fact that the interest payed back to the trust fund comes from the US government; i.e., income taxes.

The reality of the SS trust, without the 'spin', is that right now, the contributions and interest are greater than distributions. Just a few years ago, contributions alone were greater than distributions. In a year or so, contributions and interest will not be greater than distributions.

That is the story of an account with a bad future.

Social security is going broke. End of story. In a few years, contributions will need to be raised, benefits will need to be reduced, taxes will be increased, or a combination of all 3 will need to happen.

So no, social security is not broke...yet. But it will be before those of us in our 30's and 40's make it there. No getting around that. It is a hidden tax that should be scrapped now.

wrong...

Those who are now collecting benefits and those who have been paying into SS for over 40 years should be paid the benefits they paid for.

You smart young kids ( 30-40 years and younger ) who are wiser than those of us who have paid and helped support our elders for the past 50 years or so, still have plenty of years to earn and find a wiser way to invest for your later years. Probably one that will not assist those who are in need.

Aren't you known as the " Me generation"? The one that has no clue of all that has been done for you even before you were conceived?

The rest of us are just "old and in the way" to you, I'm sure.

Now, run along Junior and go do something nice for yourself...

[CaptHaddock]

Really no point in arguing with someone who claims not to understand the difference in creditworthiness between the US Treasury and his wife.

[BKKSnowBird]

Also, the part that pays disability goes broke next year. I expect Obama will do the same thing Clinton did and move money from the retirement fund.

Guaranteed to be a hot topic in the 2016 elections.

[chuckd]

From the horses mouth:

-------------------------------------------------------------------------

Starting in 1969 (due to action by the Johnson Administration in 1968) the transactions to the Trust Fund were included in what is known as the "unified budget."

http://www.ssa.gov/history/InternetMyths2.html

[ronz28]

Many who paid into SS never get a dime nor to their spouses get their "investment" due to certain rules. Its just a necessary way to get the masses to provide something for their own retirement, otherwise just like with hospital bills in the USA up until now, everyone else pays for treating the people who show up at the hospital & didn't provide for their own insurance.

[thailiketoo]

Many who paid into SS never get a dime nor to their spouses get their "investment" due to certain rules. Its just a necessary way to get the masses to provide something for their own retirement, otherwise just like with hospital bills in the USA up until now, everyone else pays for treating the people who show up at the hospital & didn't provide for their own insurance.

Oh ya. How many?

[WaywardWind]

I'm not saying bad, but SS is a Ponzi scheme. The money you pay in pays somebody else that same year. A trust was established, sort of a minimum expenditure/holding that contains no real assets, only a promise to pay.

Yes,any money paid out by the government that you didn't earn is an entitlement.

Money collected from wage earners is sent to the general fund, not specific to the SS trust.

It was never meant to be an investment fund, but a security net for those unable to work.

Social Security was established as a "generational compact" back during the depression - FICA taxes paid by those then working were used to pay benefits for those then too old or infoirm to work, and saved millions of people from lives of misery and starvation. That "pay it forward" system has worked well for nearly 80 years.

FICA taxes are not put into general revenues - some goes to the Social Security Trust Fund, and the remainder goes to fund Medicare, which provides medical care for those above 65. The Social Security Trust Fund, by law, invests the funds received in USG securities. It would take a bankruptcy of the US to threaten the value of those securities.

[NeverSure]

I'm not saying bad, but SS is a Ponzi scheme. The money you pay in pays somebody else that same year. A trust was established, sort of a minimum expenditure/holding that contains no real assets, only a promise to pay.

Yes,any money paid out by the government that you didn't earn is an entitlement.

Money collected from wage earners is sent to the general fund, not specific to the SS trust.

It was never meant to be an investment fund, but a security net for those unable to work.

Social Security was established as a "generational compact" back during the depression - FICA taxes paid by those then working were used to pay benefits for those then too old or infoirm to work, and saved millions of people from lives of misery and starvation. That "pay it forward" system has worked well for nearly 80 years.

FICA taxes are not put into general revenues - some goes to the Social Security Trust Fund, and the remainder goes to fund Medicare, which provides medical care for those above 65. The Social Security Trust Fund, by law, invests the funds received in USG securities. It would take a bankruptcy of the US to threaten the value of those securities.

I had to "like" this, but here comes the rub.

Up until now, the pay it forward has worked well because there were more people paying in than collecting. Baby Boomers (those born during the boom times after WWII from 1946 - 1964) have been paying in and a smaller population of retired people born earlier have been the recipients.

Now the boomers are starting to retire and a much smaller generation called "generation X" born between 1967 and 1979 along with "generation Y" will be paying the bills. Generation Y was born up until 1990.

So for the first time there will soon be more people collecting than are paying in. And because all that is in the SS trust fund are IOU's, something will be needed to fund people in the future.

While it is true that the SS funds are invested in USG securities, they aren't Treasuries.

"Although these bonds are issued and backed by the full faith and credit of the U.S. government, they are not available for purchase by the general public. Because they are not publically-traded, they are not subject to the fluctuations that investors experience with other treasury debt due to changes in interest rates or the dynamics of supply and demand. But there is a problem looming. A problem which can be traced to the Social Security Amendment of 1983 according to noted author and Social Security expert, Allen W. Smith, Ph.D." (emphasis mine) READ MORE

[CaptHaddock]

I had to "like" this, but here comes the rub.

Up until now, the pay it forward has worked well because there were more people paying in than collecting. Baby Boomers (those born during the boom times after WWII from 1946 - 1964) have been paying in and a smaller population of retired people born earlier have been the recipients.

Now the boomers are starting to retire and a much smaller generation called "generation X" born between 1967 and 1979 along with "generation Y" will be paying the bills. Generation Y was born up until 1990.

So for the first time there will soon be more people collecting than are paying in. And because all that is in the SS trust fund are IOU's, something will be needed to fund people in the future.

While it is true that the SS funds are invested in USG securities, they aren't Treasuries.

"Although these bonds are issued and backed by the full faith and credit of the U.S. government, they are not available for purchase by the general public. Because they are not publically-traded, they are not subject to the fluctuations that investors experience with other treasury debt due to changes in interest rates or the dynamics of supply and demand. But there is a problem looming. A problem which can be traced to the Social Security Amendment of 1983 according to noted author and Social Security expert, Allen W. Smith, Ph.D." (emphasis mine) READ MORE

SS hasn't been a purely "pay it forward" system since the 1983 reforms of the Greenspan Commission. Those reforms raised the payroll tax more than was required to meet make benefits payments at the time in order to build up the SS Trust Fund in anticipation of the increased demand that the baby boomer generation would make thirty years later, i.e. now. That means that, during our working years, we boomers were not only paying for the retirement benefits of our parents' generation, but also prepaying our own. The result is the $2.7 trillion Trust Fund that the SSA currently administers. The Trust Fund is still growing since not all the $98 billion in interest payments made by the US Treasury is currently needed to make benefits payments this year. Last year the Trust Fund grew by $32 billion, for example.

The special US Treasury bonds held in the SS Trust Fund are special in several ways: they are not traded, but they can be redeemed for full face value at any time, unlike ordinary treasuries, and therefore have no principal risk due to changes in prevailing rates. The US Treasury has made all payments due to the Trust Fund every year on the special bonds and indeed on all Treasury bonds to all holders of such bonds. That is the reason that the international bond market considers them to be the safest bonds in the world and is therefore willing to accept among the lowest interest rates.

The plan for the Trust Fund is to be used up entirely in paying benefits to the boomers over the next few decades. Under the most pessimistic projections of the SS Trustees Report the Trust Fund will be exhausted in 2034. However, that projection assumes lower than historical rates of growth for GDP. If the GDP were to grow more than that projection then the Trust Fund might never be exhausted.

Edited November 29, 2014 by CaptHaddock

[JockPieandBeans]

I think the biggest misconception is what is determined to be a " Benefit "

It applies equally to the UK and the US.

If you are required by law to pay subscriptions that will provide you with a pension at retirement age, this is not a " Benefit " it is an entitlement.

If you receive Government money because you are a layabout, sick, lame or otherwise, that is a " Benefit "

The fact that Governments plunder that money for other uses, is a totally different ballgame.

[maccaroni man]

Fact check; the democrats under LBJ were the first to tap into the social security fund.

The OP is correct, he paid in to the fund and the govt is returning his own contributions; no dole involved.

SSI is a welfare program which is social security supplemental income. An animals of different stripes.

[harryfrompattaya]

The Social Security fund is controlled by the Rothschilds for benefit of only the Familiy