This simple fix could help save Social Security

American Thinker ^ | 01/13/2023 | Brenton Smith

[SeekAndFind]

Social Security Trust Funds have squandered billions of dollars on an antiquated investment policy.

That loss tells us a lot about the financial crisis coming to Social Security.

In 2019, Social Security lost roughly $1 billion because the system invests the excess reserves on exactly the wrong minute of the year. Any other day or any minute early in the day, saves the program money.

It is 2023, and the beat goes on. Over the course of 2022, Social Security redeemed more than $100 billion in high-yield debt, and lost nearly $5 billion in interest earnings in the process. The program just gave it away.

Here is the problem: Social Security generally needs cash to pay its bills in the back half of the year. Unfortunately, the program locks up all its loose cash on June 30. So, starting July 1, the program needs to redeem bonds, and the Treasury Department picks the wrong bonds for redemption based on a policy that literally dates back to the era of black-and-white TV.

To illustrate, in November, Social Security needed extra cash to pay the bills, and redeemed nearly $100 billion in bonds at par, which earned 4 percent interest. At the same time, it kept bonds that pay less than 1 percent on the books. Given the process, the program lost nearly $2 billion in interest.

For those so inclined to look at the loss in terms of math: 95.7B * (4-.075) * 7/12 months = a lot of money that has been simply thrown away. This is not terribly different from someone spending $1,000 on ATM fees.

This underlying problem was identified more than 20 years ago. Yet, nothing has been done about it since then. The solution is not terribly difficult.

[rxh4n1]

How about the SS fund be allowed to invest in other things besides US Treasuries? It could be invested in many mutual funds spread across many asset classes.

No. Take the King’s shilling, do the King’s bidding.

[SMARTY]

Yup!

[SunkenCiv]

Thanks RACPE.

[SunkenCiv]

...the program locks up all its loose cash on June 30. So, starting July 1, the program needs to redeem bonds, and the Treasury Department picks the wrong bonds for redemption based on a policy that literally dates back to the era of black-and-white TV.

Gosh, it's almost as if the rest of the gubmint is setting the policy to benefit the rest of the gubmint, knowing that no one will oppose a later, "necessary" increase in the FICA rate.

[itsahoot]

For the government pensions it’s easy to calculate. It’s 1% for each year of service against an average of youtube high 3 salaries.

Percentages don't mean much, total amount of the payout to each system is the only thing that matters to me. Maybe one is way bigger than the other maybe not.

[Svartalfiar]

I just don’t feel sorry for people that have enough money getting by receiving expensive benefits they don’t need in retirement.

If you aren’t serious about limiting the payola, then you aren’t serious about reducing government spending.

So people that don't need SS benefits at retirement have plenty of money. If they can self-support themselves through retirement, why are they paying into SS in the first place? Why not let rich people opt out of the program entirely, and then you don't have to worry about means-testing beneficiaries?

[Svartalfiar]

I just don’t feel sorry for people that have enough money getting by receiving expensive benefits they don’t need in retirement.

If you aren’t serious about limiting the payola, then you aren’t serious about reducing government spending.

So people that don't need SS benefits at retirement have plenty of money. If they can self-support themselves through retirement, why are they paying into SS in the first place? Why not let rich people opt out of the program entirely, and then you don't have to worry about means-testing beneficiaries?