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Social Security begins to run negative
Old 09-27-2009, 07:04 AM   #1
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Social Security begins to run negative

Early retirees (actually a new take on the word FIRE) draining coffers

My Way News - Social Security strained by early retirements
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Old 09-27-2009, 07:17 AM   #2
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....and its only gonna get worse.

For all of us who have saved diligently so that we wouldn't have to rely on SS, we are going to eventually get the raw end of the deal.
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Early retirements strain Social Security system
Old 09-27-2009, 08:08 AM   #3
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Early retirements strain Social Security system

Sign of the times...
Early retirements strain Social Security system | Comcast.net
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The Congressional Budget Office is projecting that Social Security will pay out more in benefits than it collects in taxes next year and in 2011, a first since the early 1980s, when Congress last overhauled Social Security.

Social Security is projected to start generating surpluses again in 2012 before permanently returning to deficits in 2016 unless Congress acts again to shore up the program. Without a new fix, the $2.5 trillion in Social Security's trust funds will be exhausted in 2037. Those funds have actually been spent over the years on other government programs. They are now represented by government bonds, or IOUs, that will have to be repaid as Social Security draws down its trust fund.

President Barack Obama has said he would like to tackle Social Security next year.
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Old 09-27-2009, 08:20 AM   #4
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Unlike most large problems like this one, the solution is actually kind of a no brainer....it's just that the politicians don't have the stomach to make the necessary changes.

The solutions:
1) Lower the benefits
or 2) Increase the SS withholding to cover the shortfall
or 3) Increase the age at which recipients start collecting
or 4) a combination of the above

NOTE: I guess there's another solution....means test individuals and don't allow people over a certain income to receive benefits....hopefully they won't pick this one.
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Old 09-27-2009, 08:30 AM   #5
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Getting more people working for good wages helps as well.
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Old 09-27-2009, 09:05 AM   #6
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If the government would just keep their hands off our money we'd be fine. SS money goes into a general fund and the government just can't stay away.
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Old 09-27-2009, 09:43 AM   #7
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Originally Posted by DallasGuy View Post
Unlike most large problems like this one, the solution is actually kind of a no brainer....it's just that the politicians don't have the stomach to make the necessary changes.

The solutions:
1) Lower the benefits
or 2) Increase the SS withholding to cover the shortfall
or 3) Increase the age at which recipients start collecting
or 4) a combination of the above

NOTE: I guess there's another solution....means test individuals and don't allow people over a certain income to receive benefits....hopefully they won't pick this one.
Everyone knows the solutions, ultimately it's the voters that won't let them IMO. No politician could get elected or re-elected if they proposed actual solutions, thanks to AARP and many other organizations and individuals. As soon as the electorate demands change, we'll get it, not before...
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Old 09-27-2009, 09:45 AM   #8
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Everyone knows the solutions, ultimately it's the voters that won't let them IMO. No politician could get elected or re-elected if they proposed actual solutions, thanks to AARP and many other organizations and individuals. As soon as the electorate demands change, we'll get it, not before...
I think there are ways to do it which would prevent people from losing re-election. But none which would be equitable across generations, IMO.
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Old 09-27-2009, 09:52 AM   #9
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So many past threads that point out that postponing SS benefits increases the total payout, taking early SS results in lower benefits over time. Now we read that early retirements are threatening SS cashflow.

They can't both be right. Either that or just another journalistic effort intending not to inform but to worry.
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Old 09-27-2009, 10:41 AM   #10
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The cause (recession) could be the cure. How many once they find some work will continue to pay in while they draw out? That could trump those who due to job loss had no other option than to apply. Also, some (not too many) if they get work that is decent for them may suspend SS.
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Old 09-27-2009, 10:46 AM   #11
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What I love about this story are the budget projections for Social Security. Until this latest projection, Social Security was supposed to be solvent and we were discussing solutions to future cash flow problems circa 2037 or so. Now the last of the positive cash flow years is suddenly 2016. Plus there are new projections of negative cash flow in the next two years. Social Security fiscal years start in October, so this bold prediction for the future actually means negative cash flow starting next week. Surprise! I hope they get a discount on the studies when they have to keep changing the results. Maybe my "magic 8 Ball" and I should put in a bid for the next time they want cash flow projections. We won't guarantee any better accuracy, but we could be cheaper.
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Old 09-27-2009, 11:39 AM   #12
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Originally Posted by MichaelB View Post
So many past threads that point out that postponing SS benefits increases the total payout, taking early SS results in lower benefits over time. Now we read that early retirements are threatening SS cashflow.

They can't both be right. Either that or just another journalistic effort intending not to inform but to worry.
Early withdrawals may not be speeding the day the trust fund is depleted just speeding the day outputs exceed inputs. Social Security is not a big debt issue - or we wouldn't have a trust fund that will last another 25 years despite the boomers retiring. It is Federal debt in general that is the problem with irresponsible tax cuts, unfunded Medicare, Iraq War, and now depression stimulus/bailouts piling debt on top of debt. The bottom line is that we have a lot bigger fish to fry than SS.
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Old 09-27-2009, 12:19 PM   #13
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Getting more people working for good wages helps as well.
Which means having something for folks to do that justifies "good wages." And I think that's going to be a major issue for the world economy going forward. How do we create tools for productivity that allow working people to create more and therefore justify higher wages and higher levels of contribution through payroll taxes?
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Old 09-27-2009, 12:22 PM   #14
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Early withdrawals may not be speeding the day the trust fund is depleted just speeding the day outputs exceed inputs. Social Security is not a big debt issue - or we wouldn't have a trust fund that will last another 25 years despite the boomers retiring. It is Federal debt in general that is the problem with irresponsible tax cuts, unfunded Medicare, Iraq War, and now depression stimulus/bailouts piling debt on top of debt. The bottom line is that we have a lot bigger fish to fry than SS.
What trust fund? It's a pay-as-you-go system and has been!
Quote:
Without a new fix, the $2.5 trillion in Social Security's trust funds will be exhausted in 2037. Those funds have actually been spent over the years on other government programs. They are now represented by government bonds, or IOUs, that will have to be repaid as Social Security draws down its trust fund.
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Old 09-27-2009, 05:47 PM   #15
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The bottom line is that we have a lot bigger fish to fry than SS.
To paraphrase Ross Perot, there'll be a giant "sizzling sound"...
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Old 09-27-2009, 06:06 PM   #16
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Originally Posted by MichaelB View Post
So many past threads that point out that postponing SS benefits increases the total payout, taking early SS results in lower benefits over time. Now we read that early retirements are threatening SS cashflow.

They can't both be right. Either that or just another journalistic effort intending not to inform but to worry.
I don't think they are mutually exclusive.

Over the long term, taking SS early may not be a good deal on average -- but in the short term a lot of people in the 62-66 range who hadn't yet intended to retire may be forced to start collecting because they lost their jobs and can't find another one. The long term effect may not be bad for the Treasury but short-term cash flows are certainly impacted negatively.

Having said that, except for cases like that, to some degree one can look at their own health and family history of longevity to determine when to start taking benefits. Plus, with the "pay it all back and start over" rule so well-exposed now, it could be that we are seeing more people who were going to wait a few years decide instead to start taking it now, thinking they can pay it all back later if the rules don't change (and they probably wouldn't except for younger folks, as usual).
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Old 09-27-2009, 07:04 PM   #17
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What trust fund? It's a pay-as-you-go system and has been!
Not true since the 1986 (?) semi-fix. At that point it went from pas-as-yo-go to pay ahead into the "trust fund." The trust funds have not been spent, they are invested in Treasuries just like you or I might invest in Treasuries. To say they have been spent is the same as saying your investment in Treasuries has been spent. I don't hear too many people here worrying about whether their ITIPS are an insecure investment (maybe a bad one if they don't like the rate of return). The is nothing wrong about government debt per se, it is the gross amount of debt that is becoming a serious problem.
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Old 09-27-2009, 07:10 PM   #18
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Not true since the 1986 (?) semi-fix. At that point it went from pas-as-yo-go to pay ahead into the "trust fund." The trust funds have not been spent, they are invested in Treasuries just like you or I might invest in Treasuries. To say they have been spent is the same as saying your investment in Treasuries has been spent. I don't hear too many people here worrying about whether their ITIPS are an insecure investment (maybe a bad one if they don't like the rate of return). The is nothing wrong about government debt per se, it is the gross amount of debt that is becoming a serious problem.
True, but there's something a little wonky about borrowing money from your future income to buy future income streams, which sort of is what SS does when it invests in Treasuries. Granted, it seems like one of the safer investments even with the current mess, but in some sense it's like me borrowing money to buy a deferred SPIA which will start paying me at a future date. Yeah, the credit ratings are different and I don't have the unlimited power to tax, but if you think about it, that's essentially what it is...
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Old 09-27-2009, 07:34 PM   #19
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Not true since the 1986 (?) semi-fix. At that point it went from pas-as-yo-go to pay ahead into the "trust fund." The trust funds have not been spent, they are invested in Treasuries just like you or I might invest in Treasuries. To say they have been spent is the same as saying your investment in Treasuries has been spent. I don't hear too many people here worrying about whether their ITIPS are an insecure investment (maybe a bad one if they don't like the rate of return). The is nothing wrong about government debt per se, it is the gross amount of debt that is becoming a serious problem.
They have indeed been spent. And the amount of debt is indeed a serious problem, but SS debt is not somehow separate from all the other debt. SS is "invested" in "special Treasuries" that are in no way like the Treasuries, TIPS or other investments you would purchase. By their own admission (SSA) they spend it "As stated in the answer to "What happens to the taxes that go into the trust funds?", most of the money flowing into the trust funds is invested in U. S. Government securities. Because the government spends this borrowed cash...

If we didn't have deficits/debt as far as the eye can see, I would agree with your POV. And believe me, I wish I believed there was a trust fund...

Misleading the Public: How the Social Security Trust Fund Really Works

Social Security Trust Fund - Wikipedia, the free encyclopedia
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On February 2, 2005, President George W. Bush made Social Security a prominent theme of his State of the Union Address. One consequence was increased public attention to the nature of the Social Security Trust Fund. Unlike a typical private pension plan, the Social Security Trust Fund does not hold any marketable assets to secure workers' paid-in contributions. Instead, it holds non-negotiable United States Treasury bonds and U.S. securities backed "by the full faith and credit of the government". The Office of Management and Budget has described the distinction as follows:
These [Trust Fund] balances are available to finance future benefit payments and other Trust Fund expenditures – but only in a bookkeeping sense.... They do not consist of real economic assets that can be drawn down in the future to fund benefits. Instead, they are claims on the Treasury that, when redeemed, will have to be financed by raising taxes, borrowing from the public, or reducing benefits or other expenditures. The existence of large Trust Fund balances, therefore, does not, by itself, have any impact on the Government’s ability to pay benefits. (from FY 2000 Budget, Analytical Perspectives, p. 337)
Trust Fund FAQs
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As stated in the answer to "What happens to the taxes that go into the trust funds?", most of the money flowing into the trust funds is invested in U. S. Government securities. Because the government spends this borrowed cash, some people see the current increase in the trust fund assets as an accumulation of securities that the government will be unable to make good on in the future. Without legislation to restore long-range solvency of the trust funds, redemption of long-term securities prior to maturity would be necessary.

Far from being "worthless IOUs," the investments held by the trust funds are backed by the full faith and credit of the U. S. Government. The government has always repaid Social Security, with interest. The special-issue securities are, therefore, just as safe as U.S. Savings Bonds or other financial instruments of the Federal government. Many options are being considered to restore long-range trust fund solvency. These options are being considered now, over 25 years in advance of the year the funds are likely to be exhausted. It is thus likely that legislation will be enacted to restore long-term solvency, making it unlikely that the trust funds' securities will need to be redeemed on a large scale prior to maturity.
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Old 09-27-2009, 11:04 PM   #20
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Originally Posted by Midpack View Post
Everyone knows the solutions, ultimately it's the voters that won't let them IMO. No politician could get elected or re-elected if they proposed actual solutions, thanks to AARP and many other organizations and individuals. As soon as the electorate demands change, we'll get it, not before...
I agree. It's those daggone individuals and organizations fault. If the politicians could just do what they need to do without worrying about elections democracy would work the way it's designed to do.
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