Posted on 04/28/2012 4:36:33 PM PDT by SeekAndFind
You had better start increasing your personal retirement savings, because Social Security is fast approaching insolvency. According to the latest Social Security Trustees' report, released Monday, the program's combined trust funds will be exhausted by 2033 -- three years earlier than last year's projection and seven years earlier than projections made in 2006.
This means that by 2033 Social Security benefits would have to be slashed significantly. Sounds bad, right? Well, it gets worse.
Since 2010, Social Security has been running a permanent cash-flow deficit. This means that the taxes collected for the program aren't enough to cover the benefits going to retirees. The last time this happened was at the beginning of the 1980s.
Social Security optimists will argue, this time around, that the program can draw on the $2.7 trillion in assets accumulated in its trust funds. That's why Congress created the trust funds in 1983, following the recommendations of the Greenspan Commission. In any year when the program runs a surplus, Social Security invests it in trust funds, from which benefits are paid in years when outlays exceeded payroll tax receipts.
For instance in 2011, the payroll tax brought in $691 billion to pay the $746 billion in retirement benefits. To fill the gap, Social Security drew from the trust fund balances to make payments to retirees. This system will theoretically continue until the trust fund assets are exhausted in 2033. At that point, current law dictates that benefits will be slashed to the level of payroll tax revenues. That will translate to a 25 percent benefit cut across the board.
Think about it this way. Today, monthly Social Security benefits average $1,125 per recipient. After the cut, benefits would dropped to $843.75 -- a $3,375 reduction in benefits a year..
There's another reason why these trends are alarming. For years, the federal government has used Social Security's surpluses to pay for roads, education and wars. Now that the Social Security program will be demanding its money back from the Department of Treasury on an annual basis, the government will have to borrow more and more from investors, increasing the publicly held debt at a greater pace.
Lawmakers could also cut benefits or raise taxes, but they are usually reluctant to go down these unpopular roads. Neither party has introduced a serious plan to reform Social Security, but both sides have, for two years running, supported reductions in payroll tax rates without equal benefit cuts. To pull this off, policymakers borrow yet more money and transfer it to the Social Security Trust Fund to make it appear as if tax revenue was collected. It is another unfunded promise to seniors that will be paid for by future generations.
Unfortunately, Congress has been using a similar gimmick for some time. Beneficiaries of the Earned Income Tax Credit, for example, already have their share of the payroll tax refunded to them. The Making Work Pay tax credit -- part of the stimulus bill -- did the same.
The silver lining to Social Security's new annual deficit is that it exposes the fiction that the program doesn't need reform because it is fully backed by tax contributions. This is important, because a failure to reform the program means dramatic benefits cuts in the future, even for the poorest Americans. Lawmakers have many policy options to choose from: private accounts, privatization with safety net for the poor or eligibility age hike. The only bad option is to do nothing.
“Even though employees are required to contribute, there is no right to collect, at least according to SCOTUS.”
Exactly, And when the crap hits the fan then I really wonder if the government will pay out one more dime to SS. There are so many other things they may consider more important. And at that point it will be Martial law anyways. Not much of a chance at that point that there will be any more elections.
/J.G.Wentworth- I really hate that commercial.
Al Gore thought it should be in a lockbox. I would have rather seen Al Gore in a lockbox (in St. Elizabeth’s))
Look at the GM bankruptcy - about 800 years of economic law was upended whereby bondholders were stiffed and got nothing. “Normally”, in a bankruptcy, bondholders are senior and get paid first, before anyone else.
My guess is that were things to get really dicey, foreign creditors will/are get paid first. If the problem was just limited to social security, that would be another matter but when taken in aggregate the fiscal problems look pretty bad. Trillion dollar deficits, state and local governments insolvent, manufacturing jobs long ago gutted and shipped offshore, etc etc, it’s a long list of horrors.
Mencken had it right a hundred years ago - “Elections are advance auctions of stolen goods.”
Yes, how can that be allowed to stand?
What's the latest on that, are there mega civil suits and why not?
Just an acre with a working well and I’m good to go.
It’s “allowed” because if nobody stops them, they get away with it. All the laws in the world mean nothing if nobody can enforce them.
The MF global debacle is similar in that respect. This type of $h&t is just getting wound up, imo. Many people don’t have a clue what’s happened, much less what’s coming down the pike. They still seem to think that installing another politician will patch things up.
Wake up you idiots, regurgitating everything the leftist say an do is not news, and is the number one reason why you are the old media and a dying news outlet.
No one reads you anymore, Americans cannot trust what they read in your newspaper! This article about the ss trust fund is just another example of the Washington bubble, unable and unwilling to get the facts right, again!
Absolutely. Just give me 5X4 and I can stack enough candy boxes in there to make more on a daily basis than the Chief Justice ~
It's huge.
In fact, the assets owned by the US Government are so enormous we can't actually debase our currency even when we try. We are the world's reserve currency because we have the reserves!
If they’re going to cut the retirement income they’ve promised everyone (I know it’s a Ponzi scam, but they pretend it’s not, so I will to), how about letting some portion of IRA/401k funds be withdrawn tax-free to compensate?
I would prefer turning Social Security into a means-tested welfare program, but if it takes exhausting a fictitious ‘trust fund’ to get it under control, that’s better than nothing.
Did I miss something in the article,The contributions to social Security come strictly from Payroll deductions which Obama has cut in half and called his Middle class tax cut the past couple of years to the tune of hundreds of Billions of dollars from the social security trust fund. Is it just a Coincidence since that so called payroll tax cut went into effect The trust fund Insolvency has Accelerated? How come NO ONE MENTIONS THAT?
For sure - if it had been a trust fund, and managed like one (and only used to recompensate actual "donators"), it would be awash in cash.
If you want tax free withdraws, then you need to contribute to a Roth IRA or a Roth 401K if your company offers it. That said, there is no guarantee that politicians of the future won't reverse course and tax the crap out of it..
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