Give Low-income Earners Exit from Social Security

A new study just published by the National Institute on Retirement Security – “Race and Retirement Insecurity in the United States”- presents a dismal snapshot of the state of retirement savings of minority American families.

It reports that 54.3 percent of blacks work for employers that offer retirement plans compared to 62.3 percent of whites. And 43.9 percent of blacks participate in those plans compared to 53.9 percent of whites.

Among Latinos, 37.8 percent work for employers with retirement plans and just 29.7 percent participate.

Only 37.9 percent of non-white Americans have assets in a retirement account compared to 63.4 percent of whites.

And the mean amount of retirement savings held by black households is $20,132, by Latino households is $17,600, compared to $111,749 held by white households.

Many, usually those on the left who claim to represent the interests of low income Americans, say the answer to retirement security for minorities is Social Security.

Log on to www.socialsecurity.gov/estimator/. This is the Social Security Administration’s calculator where you can estimate your retirement benefit.

The site warns that the benefit estimate it reports for you may be different from what you actually get for various reasons, including “…by 2033 the payroll taxes collected will be enough to pay only about 77 cents for each dollar of scheduled benefits.”

In other words, the Social Security Administration has announced to all Americans now in their forties and younger, who will be retiring in 20 years or more, to expect only a little more than 75 percent of their promised benefits.

Year after year our brave politicians in Washington, who will claim they are looking out for us, hide from this huge problem affecting almost every working American.

They hide because it is hard. If payroll taxes, as the Social Security Administration indicates, are almost 25 percent short to pay required benefits, then taxes need to be raised by almost 25 percent to make up the difference.

What politician is going to propose this? Other options are to cut benefits paid or to raise the age at which they can be collected.

Another possible outcome, so typical of what we can expect from Washington, is to “means test.” That is, leave everyone paying taxes, but remove benefits for those above a cut-off income level.

The bottom line is that minority Americans, who on average constitute our lowest income earning Americans, get the worst deal of all. They don’t have extra resources to put in a wealth building retirement account. And the resources they do have are taxed into a Social Security system that pays out a poor benefit which in another 20 years won’t even entirely be there.

End the tyranny. At least give low income Americans the option to get out of the Social Security system. Allow them a choice to take their payroll tax and invest those funds to build their own retirement account nest egg.

Conservatively invested funds over a 45-year working life can produce savings that will pay retirement income several times greater than Social Security benefits.

Over thirty years ago, workers in Chile were given the option to opt-out of their Social Security system. A recent report from a Chilean consulting firm, Dictuc, indicates that private accounts in Chile payout retirement income equal to 87 percent of what workers were earning before retirement.

Today’s Social Security benefits, even forgetting about the upcoming shortfalls, don’t match 50 percent of pre-retirement income

Let’s help solve our national dilemma and also give low-income wage earners freedom and dignity and a chance to build wealth. Give them the option to get out from under Social Security and save in a personal retirement account.

The democrats have taken $13.4T out of Social Security and spent it on pork. JFK was the first to break open the piggy bank hand help himself.

The SS Trust Fund has always operated the same way since the inception under FDR. Contributions are converted into interest bearing, non-market T-bills. As far as SS is concerned, these T-bills are the same as those held by the Chinese and are backed by the full faith and credit of the US.

By law, income to the trust funds must be invested, on a daily basis, in securities guaranteed as to both principal and interest by the Federal government. All securities held by the trust funds are "special issues" of the United States Treasury. Such securities are available only to the trust funds.

In the past, the trust funds have held marketable Treasury securities, which are available to the general public. Unlike marketable securities, special issues can be redeemed at any time at face value. Marketable securities are subject to the forces of the open market and may suffer a loss, or enjoy a gain, if sold before maturity. Investment in special issues gives the trust funds the same flexibility as holding cash.

However, in terms of the USG, the SSTF represents an unfunded liability and is part of the $17.3 trillion national debt and is held under "Intragovernmental Holdings" as distinct from the publicly held debt. All trust funds are treated similarly including the HI (Medicare) and federal employee pension funds.

JFK was the first to break open the piggy bank hand help himself.

This is a myth. The Social Security Trust Fund was created in 1939 as part of the Amendments enacted in that year. From its inception, the Trust Fund has always worked the same way. The Social Security Trust Fund has never been "put into the general fund of the government."

Most likely this myth comes from a confusion between the financing of the Social Security program and the way the Social Security Trust Fund is treated in federal budget accounting. 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." This means that every function of the federal government is included in a single budget. This is sometimes described by saying that the Social Security Trust Funds are "on-budget." This budget treatment of the Social Security Trust Fund continued until 1990 when the Trust Funds were again taken "off-budget." This means only that they are shown as a separate account in the federal budget. But whether the Trust Funds are "on-budget" or "off-budget" is primarily a question of accounting practices--it has no affect on the actual operations of the Trust Fund itself.

I guess it boils down to the semantics of who is reporting the situation. 60 minutes program a few years ago called Social Security a warehouse of IOUs. The funds were used for other spending which means political double speak of we took the money and bought... If a private trust fund was handled like the government did people would go to jail.

The SSTF is included in our national debt. The "surplus" contributions were invested in T-bills. The USG is obligated to honor those T-bills in much the same way that it must honor the payment of the Chinese T-bills or those accumulated by the Fed.

The most important thing to remember is that even if those T-bills were exchanged for cash and deposited in a CD, SS will still go broke. It is unsustainable actuarily. In 1950 we had 16 workers for every retiree, now it is about three and in 20 years it will be 2 workers for every retiree.

Medicare is in even worse shape. It's trust funds will be exhausted in 2023. And the SS disability fund will be exhausted in 2016. Within the next few years, Congress must approve moving T-bills from the SSTF to the SSDI trust fund to continue making payments. This will impact the effective date the SSTF runs out T-bills.

Semantics and spin is what we got here. We may never know the truth.

The truth is known. You just have to read the annual Trustee Reports for SS and Medicare. What many people don't understand is that we must borrow money to continue to redeem the T-bills in the trust funds so we can pay full benefits.

Also, many do not know that by law, the premiums for Medicare Parts B and D (SMI Trust Fund) cover only 25% of the costs. The remaining 75% comes from the General Fund. In 2012 that amounted to $214.8 billion. In 2012 the GF also had to come up with $97.7 billion to redeem SSTF T-bills. With 10,000 baby boomers retiring every day for the next 20 years, Medicare and SS will eventually consume the entire federal budget if they are not reformed.

These programs are unsustainable because they pay out more in benefits than they collect in revenue. It has nothing to do with the USG "stealing" the money.

Nute Gingrich talked about Congress “Raiding Social Security” every year. Did they spend the money on pork or did they buy treasuries?

Here is the way it works: All of the revenue received from payroll taxes is immediately converted into non-market, interest bearing T-bills after benefits are paid. In essence, the USG gets the money right away.

On the other hand, the argument is that if they did not issue these T-bills then they would have to borrow the money from someone else like the Chinese. The rationale is that it is better to owe the money to ourselves rather some outsider. However, there is no doubt that Congress finds it far easier to use the trust funds to fund our debt than outside investors who must be persuaded to invest in our T-bills.

Do you really think any of the money “used to buy treasuries” will ever be repaid?

Of course. It is being done now with SS and Medicare, which are running in the red and must redeem some of their T-bills to make up the shortfall. Eventually, unless these programs are reformed, all of the T-bills held by the SSTF and HI Trust fund will be redeemed to make up the funding shortfalls for these programs. Medicare has been running in the red since 2008 and SS since 2010.

I think this mismanagement of the system will be used later to crash the retirement systems and the government will confiscate IRAs and 401ks to “save the system” which will really enslave us in socialism.

A distinct possibility that has already been talked about in academia. The idea is to seize the holdings of all 401ks and give the holders a credit similar to how SS and Medicare have been handled. When you are going bankrupt, you look for money from any source. This country is headed for fiscal disaster and the longer Congress kicks the can down the road, the more painful the solution.

Socialism is the least of our worries. It implies that there is some order and control. I am more concerned about a breakdown in our civil society if the economy crashes and the life savings of most people are wiped out. History is replete with such examples and it can happen here.

You see the laws and manipulating the fund and I see the theft of my future and resources enslavement of the country.

I am explaining to you how the system works, but I am not unaware of the consequences of what will happen if we don't get our fiscal house in order. We need to identify and understand the problem before we can solve it. Again, the entitlement programs are going bust for actuarial reasons, not because the government stole the money. These are Ponzi schemes that benefited those at the top of the pyramid, but there is not enough revenue to pay for those at the bottom of the pyramid. Wait until there are only two workers for every retiree. And these programs are just part of the problem as Medicaid, Obamacare, and food stamps are increasing even faster. The welfare state is unsustainable.

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