Modeling Social Security 2033 Insolvency

The fact that a statement comes up in a Google search does not necessarily make it true. This is one of my complaints about AI. I want to understand things, not just cut and paste the top response from my Google search. And, in this case, your Google search came up wrong. Presidents do not borrow money or fund the government. Only Congress can do that. It's in the Constitution.
 
Agree, but presidents are associated with them. Bush gets a lot of press for tax cuts and the war. As an example. Not really accurate, but a common example. The pres. is a marker in time. Rather than a person doing it on their own.
 
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Since 1983, every US President has borrowed from Social Security to pay for government expenditures.

I literally cut and pasted that statement in.
I never said they were stealing money out of SS. If thats what you are thinking.

If only there was a magic Google box, we could copy and paste statements into for results.
Try it, you might like it. :biggrin:

Agree, but presidents are associated with them. Bush gets a lot of press for tax cuts and the war. As an example. Not really accurate, but a common example. The pres. is a marker in time. Rather than a person doing it on their own.

Oh, I misunderstood... you copied and pasted something from the internet so it must be true. Except Presdents don't borrow, Presidents don't pay for government expenditures, nobody really borrows from SS... rather, SS invests its surpus funds in special ssue government bonds. Who ever said anything about stealing money out of SS?

In fact, Congress can and has overridden a presidential veto of a budget so in those cases the government spent money contrary to a president's wishes. If money is spent then it has been approved by the House and Senate and in most but not all cases signed by the president. It is a bit ignorant to hang spending on a president when all spending has to be approved by Congress first. Even the "Bush" tax cuts and tax spending that you refer to had to be approved by Congress first, and then President Bush. Do you really misunderstand this basic and fundamental aspect of how our federal government operates?

A little critical thinking would be nice to see.
 
I agree. The political optics of taking 23% out of someone's $1200/mo benefit are much worse than taking 30% out of someone who paid in the max for 35 years. Never mind that some people who paid the max for 35 years may be every bit as reliant on their SS as someone who paid the minimum for 40 quarters.

Prepare for the term "affluent retiree" to be twisted by the media to become a slur, in preparation for screwing over "affluent" retirees. As in: "The XYZ plan to save Social Security includes cuts to benefits for low income beneficiaries, while the ABC plan preserves benefits for lower earners, while taking more from affluent retirees who don't rely on Social Security. The ABCs say it is unfair to cut benefits for those who most need them, while the XYZs say that a 30% cut to affluent retirees is much larger in dollars, and penalizes those who paid in more to the system."

The political fights over this issue are going to be epic.
I think there are ways to solve the issues that are more nuanced and win win.
We also need to be grounded on what we actually think we are “owed” vs our contributions. For instance, most people do not consider that half of the money put into SS was contributed by their employer on their behalf, so not really their money. My understanding is that on average, about 15% of the SS proceeds received by an individual is their own money.
As far as changes I would make, raise the minimum retirement age to 63 over 10 years (3 month increments), and means test for waiting beyond FRA by extending the window out to 74 and reducing the amount of “bonus” SS payments for affluent individuals. The threshold for benefits calculation would start based off of your FRA payment at 67years 0 months, and at a reasonably high dollar amount to exclude lower income individuals that need to wait until 70 because they need the extra SS. So an example would go like this:
<$2750 @ 67, retire at 70 with no reduction
$2750-$3500, retirement extends to 74, no reduction (4%/year vs 8%)
$3501-$4000, retirement extends to 74, 25% reduction (3%/year vs 8%)
>$4000, retirement extends to 74, 50% reduction (2%/year vs 8%).
Obviously there is pro-rata calculations between these intervals, but this example presents the general concept.
This method seems to be fairest to all and only disincentivizes “affluent” people for waiting beyond FRA to claim.
I was also thinking about a permanent fix to SS and Medicare using an approach where retirement and medical accounts are started by parents for children at birth (“529-R” or 529-M”). Similar rules as apply to 529s now could apply. There would also be a “payback” feature during the adult child’s working life that would require some multiple of the initial amount to be paid back by the child to keep SS and Medicare solvent over approximately 60 years (based on start of program to eligibility for use of funds), while those programs are mostly “phased out”. There likely would always need to be some safety net which could be paid for by everyone in the form of a small dedicated sales tax (fraction of 1%).
Thoughts? BTW, I will either be in the top 1 or 2 groups, so this provision could impact me.
 
The problem with penalizing based on the amount of SS one receives is that many people receiving $4000+ need the money just as much or more than someone receiving $1500. For example, someone could have $1 Million+ liquid in the bank from an inheritance, but only be receiving $1500, but someone wrecked by a late-life divorce could have very little in assets and really need the $4000/mo they earned to survive.

If there is going to be means testing, it needs to look at assets, not just income or the amount of SS someone is receiving. Means testing SS would be very difficult, and prone to people exploiting the inevitable loopholes, just like the tax code.

I personally think Step 1 should be just to remove the dang cap on contributions already. This is from someone who paid the max for decades. It never made any sense to me that I got a raise part way through the year. Not that I complained, but it made no sense. The fact that our elected representatives refuse to even consider this speaks volumes.
 
We also need to be grounded on what we actually think we are “owed” vs our contributions. For instance, most people do not consider that half of the money put into SS was contributed by their employer on their behalf, so not really their money.
I am going to take issue with what I highlighted in bold.

My employers did not make their half of the SS contribution because of my smile. They made it as part of the total compensation package they agreed to pay me for my labors and time over a period of 40+ years. Just like they helped pay for my medical insurance and put money into my pension plan. I do regard it as compensation that I earned. Call it my money or my benefit or whatever, I earned it. We all did. If they hadn’t paid it to SS I would have asked for more salary so that I could have better financed my retirement. Most self employed people do the same all the time. Nothing new here.
 
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Current politicians (no names) about to move into power talk about SS as though it's part of the national deficit causing many of our problems. As we all know, it's only part of the deficit because the trust fund money was "borrowed/stolen" and is owed/needs to be paid back. That kind of talk irks me to no end because the trust fund should have never been included in the national deficit. It is always implied that it is a major cause of our national deficit problems. With those kind of implications, I have no faith that SS will get bailed out by 2033, 2034 or whenever and I fully expect that we will all take a 20-30% cut around that time....because I don't see the parties finding an agreed upon method to come up with a solution to continue to pay the current benefits. Until I see a realistic solution, that is my view of things. I call myself a realist.

At least my view is that I'll get my current "full" amount until the surplus has run out and then I'll get the reduced amount after that.
 
I am going to take issue with what I highlighted in bold.

My employers did not make their half of the SS contribution because of my smile. They made it as part of the total compensation package they agreed to pay me for my labors and time over a period of 40+ years. Just like they helped pay for my medical insurance and put money into my pension plan. I do regard it as compensation that I earned. Call it my money or my benefit or whatever, I earned it. We all did. If they hadn’t paid it to SS I would have asked for more salary so that I could have better financed my retirement. Most self employed people do the same all the time. Nothing new here.
Thanks for making that point. I was about to say the same thing. Economically, the employee "pays" the employer contribution also. Why? Because the market sets wage levels which assume that payment.

If my employer did not make that payment, presumably my wage would be higher.

Any analysis of SS returns should consider the employer contribution.

It is not something I care about per se. I may look at it at some point if I think about it.
 
I am going to take issue with what I highlighted in bold.

My employers did not make their half of the SS contribution because of my smile. They made it as part of the total compensation package they agreed to pay me for my labors and time over a period of 40+ years. Just like they helped pay for my medical insurance and put money into my pension plan. I do regard it as compensation that I earned. Call it my money or my benefit or whatever, I earned it. We all did. If they hadn’t paid it to SS I would have asked for more salary so that I could have better financed my retirement. Most self employed people do the same all the time. Nothing new here.
Agreed, plus all the earnings on those securities invested by the employer and employee in the SS fund are rightly "their" money.

If there is going to be means testing, it needs to look at assets, not just income or the amount of SS someone is receiving. Means testing SS would be very difficult, and prone to people exploiting the inevitable loopholes, just like the tax code.
Means testing with assets would be even more difficult, plus I don't think we should be penalizing people for saving when we want them to do more of it. That would disincentivize saving.
 
.... I personally think Step 1 should be just to remove the dang cap on contributions already. ... It never made any sense to me that I got a raise part way through the year. Not that I complained, but it made no sense. The fact that our elected representatives refuse to even consider this speaks volumes.
It makes sense. There are alternatives, but I don't see where you can say it makes no sense?

Once you hit the cap, you stop paying into SS, and importantly, you stop receiving any credits. SS was designed to be a 'third leg of a stool', so once you're getting X amount, that's deemed to be enough. At that point, you really shouldn't need additional support from a forced system.

If we removed the cap, we'd be getting even more in our monthly check, and would be pointed to by lower lifetime earnings people - "Look at that rich guy getting X times what I get!".

Sure, you could remove the cap, and stop the credits, but is that "fair"? SS is already quite progressive in its payouts. Maybe it should be made even more progressive, maybe additional bend points rather than a brick wall at the cap? Those could be debated, but I don't think that qualifies the present cap as 'non-sense'.
 
Agreed, plus all the earnings on those securities invested by the employer and employee in the SS fund are rightly "their" money.


Means testing with assets would be even more difficult, plus I don't think we should be penalizing people for saving when we want them to do more of it. That would disincentivize saving.
In my opinion, means testing is already done in SS via the bend points that reduce the relative payout for higher income earners. Any more means testing would turn it into another welfare program, which I would oppose. One thing I like about SS is that most of the beneficiaries (yes, I know there are exceptions) have to have paid something in for a significant amount of time to get benefits.
 
Current politicians (no names) about to move into power talk about SS as though it's part of the national deficit causing many of our problems. As we all know, it's only part of the deficit because the trust fund money was "borrowed/stolen" and is owed/needs to be paid back. That kind of talk irks me to no end because the trust fund should have never been included in the national deficit. It is always implied that it is a major cause of our national deficit problems. With those kind of implications, I have no faith that SS will get bailed out by 2033, 2034 or whenever and I fully expect that we will all take a 20-30% cut around that time....because I don't see the parties finding an agreed upon method to come up with a solution to continue to pay the current benefits. Until I see a realistic solution, that is my view of things. I call myself a realist.

At least my view is that I'll get my current "full" amount until the surplus has run out and then I'll get the reduced amount after that.
As a former head of SS pointed out on a TV show recently... SS has added NOTHING to the deficit or the debt...

It is a stand alone account and has been paying what it owes from money coming in... including the savings it had..

It did hide how bad the general fund was (IIRC) during Clinton to show a 'surplus' back then... the general fund was not in surplus... and now that the general fund has to pay back what it borrowed from SS it now looks really bad..
 
I am going to take issue with what I highlighted in bold.

My employers did not make their half of the SS contribution because of my smile. They made it as part of the total compensation package they agreed to pay me for my labors and time over a period of 40+ years. Just like they helped pay for my medical insurance and put money into my pension plan. I do regard it as compensation that I earned. Call it my money or my benefit or whatever, I earned it. We all did. If they hadn’t paid it to SS I would have asked for more salary so that I could have better financed my retirement. Most self employed people do the same all the time. Nothing new here.
I guess you could have asked... good luck with that. If your employer wasn't required to pay the government by law they would have just kept it, not paid you :facepalm:
 
I guess you could have asked... good luck with that. If your employer wasn't required to pay the government by law they would have just kept it, not paid you :facepalm:
They certainly could have kept it. And I could have shopped myself to other employers.
 
As a former head of SS pointed out on a TV show recently... SS has added NOTHING to the deficit or the debt...

It is a stand alone account and has been paying what it owes from money coming in... including the savings it had..

It did hide how bad the general fund was (IIRC) during Clinton to show a 'surplus' back then... the general fund was not in surplus... and now that the general fund has to pay back what it borrowed from SS it now looks really bad..

Now that annual SS receipts are less than annual benefits paid redeeming any of the non-marketable securities in the trust fund (to cover that deficit) does require issuing additional, marketable debt in the open market.
 
Now that annual SS receipts are less than annual benefits paid redeeming any of the non-marketable securities in the trust fund (to cover that deficit) does require issuing additional, marketable debt in the open market.

How the general fund goes about repaying its legal obligation to the SS trust fund is no concern of the trust fund.
 
How the general fund goes about repaying its legal obligation to the SS trust fund is no concern of the trust fund.

But it absolutely adds to total federal debt outstanding, and must be serviced.

And the trust fund...simply doesn't matter.

Because Congress determines annual benefits paid, which can change.

Subject to political repercussions. :)
 
Now that annual SS receipts are less than annual benefits paid redeeming any of the non-marketable securities in the trust fund (to cover that deficit) does require issuing additional, marketable debt in the open market.
All else being equal, yes... but if doesn't change the national debt at all since the government is just issueing public debt and using the proceeds to redeem intergovernmental debt held by the SS Trust Fund.

Does the US national debt include debt issued to the SS Trust Fund?​


Answer
Yes, the US national debt includes debt issued to the Social Security Trust Fund. The national debt consists of two main components: debt held by the public and intragovernmental debt.
https://en.wikipedia.org/wiki/National_debt_of_the_United_States
The Social Security Trust Fund is part of the intragovernmental debt, which accounts for about 21.8% of the total national debt.
https://www.pewresearch.org/short-reads/2023/02/14/facts-about-the-us-national-debt/
 
How the general fund goes about repaying its legal obligation to the SS trust fund is no concern of the trust fund.
Until the debt starts going unpaid (i.e. the general fund loses its ability to pay its bills).
Personally I plan on a 20+% cut in my SS payments in eight years or so when the Trust Fund goes 'bust'. I agree with others that Congress seems to have no interest (pun intended) is seriously addressing the issue in a timely fashion. Plan for the badness & hope for the better ;)
 
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