Social Security Benefits?
We just received an increase in our Social Security benefits; a total of $22.00 per month. Fuel keeps going up, the cost of food keeps rising, and so does the cost of living. An increase of $22.00 doesn’t go very far does it? Much has been written and spoken about the Social Security system– it is frightening, and with good reason. The “trust fund” established and paid into (for 40 years or so) by all workers in countries that have this provision to provide for their retirement has been accused of quietly going bankrupt for years. Here are some truths about your Social Security. One politician recently stated that he knew “that the promise of a secure retirement, free from poverty or financial worry, is important to Canadians of all ages. Reducing the anxiety that many Canadians feel about their retirement is not just an issue for older Canadians. It is an issue for all Canadians.”
In 2013, the total Social Security in the USA expenditures was $1.3 trillion, 8.4% of the $16.3 trillion GNP (2013) and 37% of the Federal expenditures of $3.684 trillion. Income derived from Social Security is currently estimated to keep roughly 20% of all Americans, age 65 or older, above the Federally defined poverty level.
If you were an average income, married worker retiring at 65 with an average life expectancy, you and your employer’s payroll taxes taken out and invested with interest over your working life would cover about seven years of benefits for both of you. For the rest of your lives, your SS benefits would have to come from someone else’s payments.
In 2003 economics researchers Hobijn and Lagakos estimated that the social security trust fund would run out of money in 40 years.
And Social Security is far from being a sacred cow. Congress can change the rules whenever they want, for better or worse.
In 1954, SS benefits were extended to farmers. In 1972, benefits were indexed according to inflation. In 1983, some of the benefits became taxable. In 1994, Congress transferred $122 billion from the old-age fund to the disability fund, presumably to cover anticipated benefit payments not in the existing account.
As of 2008, the estimates for the underfunding of U.S. states’ pension programs range from $1 trillion using the discount rate of 8% to $3.23 trillion using U.S. Treasury bond yields as the discount rate. The present value of unfunded obligations under Social Security as of August 2010, five years ago, was approximately $5.4 trillion. In other words, this amount would have to be set aside today such that the principal and interest would cover the program’s shortfall between tax revenues and payouts over the next 75 years.
Alarms are good things when they warn us of danger.
If you’re beginning to hear a high-pitched siren in the background, take care and take cover by providing for your own retirement needs starting now. You are responsible for your own security, social or otherwise. Sooner or later, the party will end, and you will need a plan to get home safely.