2022 Social Security Trustees Report

[Turbo29]

A look at the yearly balances in the SS Trust fund since 1957.


SSA--Trust Fund Data

 

[Koolau]

Some good news…

https://asburyparkpress-nj.newsmemory.com/?publink=0e3497e15_13484e0

This comes up very so often, but it’s hard to imagine that the government would ever let these social support programs ever go broke.
I feel sorry for our kids and grandkids who will have to foot the bill to “bail out” the systems for us.

Well, we did it for our parents. Remember back in the 80s they were fixing SS for all time. Of course anyone in power at that time (and still living) is now on a cushy gummint pension (plus SS.)

 

[USGrant1962]

Well, we did it for our parents. Remember back in the 80s they were fixing SS for all time. Of course anyone in power at that time (and still living) is now on a cushy gummint pension (plus SS.)

The 1983 amendments didn't fix SS for all time, and didn't claim to*. At the time, they fixed it into the 21st Century.

I found a the legislative history written in 1983 and it includes a projection table with Trust Fund drawdown starting just after 2020 - pretty darn accurate for a 39-year-old forecast. Look at page 45 (pg 43 in the pdf) https://www.ssa.gov/policy/docs/ssb/v46n7/v46n7p3.pdf

*EDIT - not to say a politician or two didn't say that - just that the legislation was clear that it was a ~40-year fix and I remember that from the day.

 

[ERD50]

I very much doubt it will be across-the-board. ....

As I understand it (and I may have it wrong), the current law says it is applied across the board. Of course it could be changed, but that's what it would take, I think.

If the haircut happened, that would be bad news for those who delayed to age 70 - a bigger $ amount cut. I suppose even the current law might allow for a calculation to equalize that, but who knows.

I'm pretty sure something other than a 75% across the board cut will happen. And I've also heard that fairly modest adjustments now is all it would take to ensure 100% to beyond 203x, but since we aren't in a panic yet, unlikely to happen.


-ERD50

 

[Chuckanut]

It's like someone putting some cash in a wall safe for their new car fund every payday and then immediately taking the same cash out so they can go to dinner and throwing an IOU in the safe to replace the cash.

So where is the Social Security Administration supposed to store the excess money?

 

[pb4uski]

I very much doubt it will be across-the-board.

SS is a very progressive system with its first & second bend points with few additional earnings credited past that second bend point.

Remember, those with higher income in retirement are already taxed on 85% of their SS benefit.

SS has become more like they entitlement program it is in actuality versus the fiction of being strictly an insurance plan.

Those receiving higher benefits are the most likely to see a 25% (or more) reduction in their SS check...e.g. $3,000 instead of $4,000.

Those who never exceeded their first bend point may see something closer to a 5% reduction, if anything.

I have yet to see anything written anywhere indicating that a haircut would be anything other than across-the-board, so do you have any authoritative support for your assertions or are you just making sh!t up?

 

[Koolau]

The 1983 amendments didn't fix SS for all time, and didn't claim to*. At the time, they fixed it into the 21st Century.

I found a the legislative history written in 1983 and it includes a projection table with Trust Fund drawdown starting just after 2020 - pretty darn accurate for a 39-year-old forecast. Look at page 45 (pg 43 in the pdf) https://www.ssa.gov/policy/docs/ssb/v46n7/v46n7p3.pdf

*EDIT - not to say a politician or two didn't say that - just that the legislation was clear that it was a ~40-year fix and I remember that from the day.

Sorry, wasn't into reading legislative history back in '83. But I do recall the politicians ballyhooing how it would fix SS (period.) Full disclosure: I didn't really believe it would fix SS (for all time.) SO I was being a bit facetious in my last post - but not TOO facetious though YMMV.

 

[Turbo29]

So where is the Social Security Administration supposed to store the excess money?

That's not the point. The point is that one division of the government (SSA) lent it to another division of the government (Treasury) and, as the government has been in a deficit for years, it was already spent. When SSA gets the money back to pay beneficiaries, the Treasury must immediately make up those funds from somewhere else. The "Trust Fund" is just an accounting entity. It in no way indicates that any real resources have been set aside to pay benefits in the future.

 

[pb4uski]

So where is the Social Security Administration supposed to store the excess money?

That's not the point. The point is that one division of the government (SSA) lent it to another division of the government (Treasury) and, as the government has been in a deficit for years, it was already spent. When SSA gets the money back to pay beneficiaries, the Treasury must immediately make up those funds from somewhere else. The "Trust Fund" is just an accounting entity. It in no way indicates that any real resources have been set aside to pay benefits in the future.

Nice dodge, but you still haven't answered the question. You would want "real resources" set aside... set aside how? in $100 bills in lockers in a huge vault somewhere? (Makes one wonder how large a storage facility one would need for $2.9 trillion).

U.S. Treasury securities... which are prized by the rest of the world... are not good enough for you?

[mod edit]

 

[USGrant1962]

By some poster's logic, iBonds and Treasury bonds/bills are hoaxes and are not real. The special securities the Treasury issues for the SS Trust Fund are exactly the same thing. They even pay interest to SSA, which is helping keep SS afloat.

Mixing up deficit spending (a real problem, especially as interest rates rise) and a trust fund that is invested in Treasury securities (real bonds) is a non-sequitur. Unless you think your iBonds and govies are not real?

 

[pb4uski]

^^^ Exactly! It's just common sense.

 

[jimbee]

By some poster's logic, iBonds and Treasury bonds/bills are hoaxes and are not real. The special securities the Treasury issues for the SS Trust Fund are exactly the same thing. They even pay interest to SSA, which is helping keep SS afloat.

Mixing up deficit spending (a real problem, especially as interest rates rise) and a trust fund that is invested in Treasury securities (real bonds) is a non-sequitur. Unless you think your iBonds and govies are not real?

Thank you General, for increasing the S/N ratio.

 

[copyright1997reloaded]

Nice dodge, but you still haven't answered the question. You would want "real resources" set aside... set aside how? in $100 bills in lockers in a huge vault somewhere? (Makes one wonder how large a storage facility one would need for $2.9 trillion).

U.S. Treasury securities... which are prized by the rest of the world... are not good enough for you?

[mod edit]

No, they aren't good enough - too much single issuer risk. The funds should be invested in manner similar to other defined benefit plans (i.e. pension plans), across a variety of asset classes.

Would you suggest that a company that has its entire pension fund invested in debt instruments of that company would be doing its fiduciary duty? And yes, I *do* understand that government debt is different in that they have the power of taxation. The risk is still there - if the US $ at some point is no longer the reserve currency, then paying back $ to the trust fund might become meaningless if the currency has a severe devaluation (i.e. hyper-inflation).

But Koolau (and now others) has dared to say something about the emperors new clothes....so carry on talking about how great they look.

 

[ownyourfuture]

Koolau
Of course, the open secret about SS is that there's no actual money available to pay even today's SS recipients. The system has to cash IOU's (treasury bonds pledged against SS money taken to run the country years ago.) Now, even those IOUs are running out, I guess.

Turbo29
It's like someone putting some cash in a wall safe for their new car fund every payday and then immediately taking the same cash out so they can go to dinner and throwing an IOU in the safe to replace the cash.

The point is that one division of the government (SSA) lent it to another division of the government (Treasury) and, as the government has been in a deficit for years, it was already spent. When SSA gets the money back to pay beneficiaries, the Treasury must immediately make up those funds from somewhere else. The "Trust Fund" is just an accounting entity. It in no way indicates that any real resources have been set aside to pay benefits in the future.

A pamphlet included with my 401(k) statement from Vanguard sometime in 2006 pretty much states the same thing. Interesting to note, that at that time, it was supposed to be depleted by 2040, vs 2035 today.
(apologies for the scan quality)

Someone already mentioned Social Security reform of 1983 in the thread.
As I understand it, what that did is make up to 50% of SS benefits taxable once a certain income level was reached. In case anyone here isn't aware, they upped that to 85% 10 years later in 1993.

#1: Social Security was never supposed to be taxed.
#2: If our nations 'leaders' decision to tax it wasn't enough salt in the wound, they set the income levels at which point a portion becomes taxable preposterously low.

Up to 50% of Social Security income is taxable for individuals with a total gross income including Social Security of at least $25,000 or couples filing jointly with a combined gross income of at least $32,000

Up to 85% of Social Security benefits are taxable for an individual with a combined gross income of at least $34,000 or a couple filing jointly with a combined gross income of at least $44,000

In spite of gouging people for being responsible & saving, resulting in SS having to pay out less than promised, it's still going broke.
That's not a Ponzi scheme, that's a criminal act. On top of that, my state also taxes SS.
The good news is that there's a pretty good chance new legislation will eliminate that.

Trivia: Up until John McCain passed away, there were 2 people who voted in favor of taxation both times, & still active politically. Now there’s only one.

 

[ShokWaveRider]

None of us really know what will happen until the time comes, or congress implements changes to bolster both Medicare and SS. I honestly find it difficult to believe they will leave them as they are, but who knows these days.

 

[CardsFan]

The 1983 amendments didn't fix SS for all time, and didn't claim to*. At the time, they fixed it into the 21st Century.

I found a the legislative history written in 1983 and it includes a projection table with Trust Fund drawdown starting just after 2020 - pretty darn accurate for a 39-year-old forecast. Look at page 45 (pg 43 in the pdf) https://www.ssa.gov/policy/docs/ssb/v46n7/v46n7p3.pdf

*EDIT - not to say a politician or two didn't say that - just that the legislation was clear that it was a ~40-year fix and I remember that from the day.

If I am reading this correctly, way back then they predicted the suplus would end right about now.

Amazing.

 

[USGrant1962]

If I am reading this correctly, way back then they predicted the suplus would end right about now.

Amazing.

Yup, it is almost like Congress and SSA use professional actuaries and financial analysts instead of SGOTI's opinion. Who knew?

 

[Calico]

Yup, it is almost like Congress and SSA use professional actuaries and financial analysts instead of SGOTI's opinion. Who knew?

 

[pb4uski]

No, they aren't good enough - too much single issuer risk. The funds should be invested in manner similar to other defined benefit plans (i.e. pension plans), across a variety of asset classes.

Would you suggest that a company that has its entire pension fund invested in debt instruments of that company would be doing its fiduciary duty? And yes, I *do* understand that government debt is different in that they have the power of taxation. The risk is still there - if the US $ at some point is no longer the reserve currency, then paying back $ to the trust fund might become meaningless if the currency has a severe devaluation (i.e. hyper-inflation).

But Koolau (and now others) has dared to say something about the emperors new clothes....so carry on talking about how great they look.

"too much single issuer risk"? That has to be the all-time silliest post of any that I have seen since joining in 2010... and I have seen some doozies. These are full faith and credit securities.... NO credit risk. Besides, do you really want the SSA investing in corporate bonds and stocks... with their decisions impacting supply and demand for corporate bonds and stocks... I just don't think that is a very bright idea at all.

I highly doubt that any judge would render a verdict that a pension plan manager was breaching its fiduciary duty if it invested all pension fund assets in U.S. Treasury securities. They don't because they are willing to take a little risk, get better returns which in turn reduce the amount of required pension plan contributions by the sponsor... the SSA doesn't have that incentive.

If you're really concerned on the USD as a reserve currency, how much of your total portfolio is in other than USD denominated assets?

 

[CardsFan]

Yup, it is almost like Congress and SSA use professional actuaries and financial analysts instead of SGOTI's opinion. Who knew?

But where is the fun in that!

 

[pb4uski]

...Social Security was never supposed to be taxed. ...

Do you have any evidence to support that statement?

Social security was enacted in 1935. The taxability of benefits wasn't decided by Congress but by a pair of 1938 Treasury Department Tax Rulings and another in 1941. So while it is true that the Treasury initially decided not to tax social security, it is patently false to claim that Social Security was "never supposed to be taxed" since Congress didn't address taxation when it enacted social security in 1935.


I found this document from when Congress first considered taxing Social Security in 1979:

... The present tax treatment of social security was established at a time when both social security benefits and income tax rates were low. In 1941 the Bureau of Internal Revenue ruled that social security benefits were not taxable, most probably because they were viewed as a form of income similar to a gift or gratuity.

The council* believes that this ruling was wrong when made and is wrong today. The right to social security benefits is derived from earnings in covered employment just as is the case with private pensions.

The council believes that the current tax treatment of private pensions is a more appropriate model for the tax treatment of social security, Pension benefits from contributory private pension plans (including those for government employees) are now taxed to the extent that the benefits exceed the employee's accumulated contributions to the plan. Cumulative retirement benefits up to the employee's own total contributions are not taxed because the income from which the contributions were paid was taxable. That part of the benefit representing the employer's contribution and interest income on both the employee's and the employer's contributions is taxed when received.

Estimates by the Office of the Actuary of the Social Security Administration indicate that workers now entering covered employment in aggregate will make payroll tax payments totaling no more than 17 percent of the benefits that they can expect to receive. The self-employed will pay no more than 26 percent on average. Therefore, if social security benefits were accorded the same tax treatment as private pensions, only 17 percent of the benefit would be exempt from tax when received, and 83 percent would be taxable. . .

* The 1979 Advisory Council and the Greenspan Commission

And that is where the 85% comes from.. to in a very broad brushed way put the taxation of social security benefits on the same playing field as other contributory pension benefits from contributory pension plans, non-deductible IRAs, life annuities, etc where only the participant's contributions are not taxed... while at the same time giving a tax break to lower income recipients.

 

[copyright1997reloaded]

"too much single issuer risk"? That has to be the all-time silliest post of any that I have seen since joining in 2010... and I have seen some doozies. These are full faith and credit securities.... NO credit risk. Besides, do you really want the SSA investing in corporate bonds and stocks... with their decisions impacting supply and demand for corporate bonds and stocks... I just don't think that is a very bright idea at all.

I highly doubt that any judge would render a verdict that a pension plan manager was breaching its fiduciary duty if it invested all pension fund assets in U.S. Treasury securities. They don't because they are willing to take a little risk, get better returns which in turn reduce the amount of required pension plan contributions by the sponsor... the SSA doesn't have that incentive.

If you're really concerned on the USD as a reserve currency, how much of your total portfolio is in other than USD denominated assets?

Glad I could make your day and that I get the award (in your mind) of the silliest post you've ever seen.

The US Federal debt is now $245K per taxpayer, and the debt to GDP ratio now 129%. US Unfunded liabilities is approaching $170 trillion dollars. The trend is NOT our friend when it comes to the ability of the US Government to continue these programs. It is all resting on our unique ability to magically buy goods from other countries just by (virtually) printing money.

While my allocations and investments are my concern, I will say that I've moved my slowly but surely tried to hedge. I never rush these decisions, because I can be wrong:
1) Almost all of my fixed is either short term or inflation adjusted.
2) I've moved my commodities and precious metals allocation up from almost nothing a half dozen years ago to 7% or so today.
3) My equities are approximately 85% US and 15% international, but many of my US domiciled companies derive more than half of their revenues overseas.

But you do you, keep believing that Social Security is sound, Medicare is sound, the 30 trillion and expanding debt isn't a problem, 9+ trillion on the Federal Reserve balance sheet is A-OK, our lack of industrial might is perfectly fine, and so on.

I will be silly me, thinking that things aren't getting better and that I need to prepare for bad times....including the eventual impact to Social Security.

 

[ownyourfuture]

Do you have any evidence to support that statement?

Close enough for me.

Since a pair of 1938 Treasury Department Tax Rulings, and another in 1941, Social Security benefits have been explicitly excluded from federal income taxation.
(A revision was issued in 1970, but it made no changes in the existing policy.)

ex·plic·it·ly
in a clear & detailed manner, leaving no room for confusion or doubt.

https://www.ssa.gov/history/taxationofbenefits.html

I still don't agree with it, but here's an interesting article which repeats much of what you posted.

https://www.socialsecurityintelligence.com/the-double-taxation-of-social-security/

 

[ownyourfuture]

Glad I could make your day and that I get the award (in your mind) of the silliest post you've ever seen.

The US Federal debt is now $245K per taxpayer, and the debt to GDP ratio now 129%. US Unfunded liabilities is approaching $170 trillion dollars. The trend is NOT our friend when it comes to the ability of the US Government to continue these programs. It is all resting on our unique ability to magically buy goods from other countries just by (virtually) printing money.

While my allocations and investments are my concern, I will say that I've moved my slowly but surely tried to hedge. I never rush these decisions, because I can be wrong:
1) Almost all of my fixed is either short term or inflation adjusted.
2) I've moved my commodities and precious metals allocation up from almost nothing a half dozen years ago to 7% or so today.
3) My equities are approximately 85% US and 15% international, but many of my US domiciled companies derive more than half of their revenues overseas.

But you do you, keep believing that Social Security is sound, Medicare is sound, the 30 trillion and expanding debt isn't a problem, 9+ trillion on the Federal Reserve balance sheet is A-OK, our lack of industrial might is perfectly fine, and so on.

I will be silly me, thinking that things aren't getting better and that I need to prepare for bad times....including the eventual impact to Social Security.

I'm with you, but for future generations sake, I sincerely hope we're wrong.
I'm guessing you've heard of MMT modern monetary theory ?
Not going to name any individual politicians/policymakers, but I can't help but cringe a little bit when I hear them touting this.............

What Is Modern Monetary Theory (MMT)?
Modern Monetary Theory (MMT) is a heterodox macroeconomic framework that says monetarily sovereign countries like the U.S., U.K., Japan, and Canada, which spend, tax, and borrow in a fiat currency that they fully control, are not operationally constrained by revenues when it comes to federal government spending.

Put simply, such governments do not rely on taxes or borrowing for spending since they can print as much as they need and are the monopoly issuers of the currency. Since their budgets aren’t like a regular household’s, their policies should not be shaped by fears of a rising national debt.

https://www.investopedia.com/modern-monetary-theory-mmt-4588060

 

[pb4uski]

... But you do you, keep believing that Social Security is sound, Medicare is sound, the 30 trillion and expanding debt isn't a problem, 9+ trillion on the Federal Reserve balance sheet is A-OK, our lack of industrial might is perfectly fine, and so on. ...

Find a single post that I have made where I have claimed that Social Security is sound or that Medicare is sound or that the amount of federal debt isn't a problem or that the Fed balance sheet is A-OK and you might have a valid point. So please, put up or shut up and stop lying. You're being ridiculous now.