What will happen to Social Security and how will it impact you?

Yes, the government could shut it down. More likely, they will just make it unattainable or useless. Raise the retirement age to 70 or reduce the benefits or both. We like to make the argument that people are living longer so raising the retirement age shouldn’t be a problem. Unfortunately we live longer but the deterioration of age still happens. Your ability to work decreases dramatically between 60 and 70.

When your young you seem to think more near term. The idea of winding up at 70 with nothing is hard to fathom. If you want to retire today and you don’t have any social security you would need, $1 million in the bank just to live at the poverty level (currently just over $10,000/yr). Few 20 year olds think this through. At 20, it’s easy to say “We don’t need no stinking Social Security check”.

We could increase the SS tax but if it goes into the government coffers, it will be spent just as it has over the past 80 years. And we won’t have solved the problem. The current system of letting congress use it as thier piggy bank won’t solve the problem. It needs to be overhauled and taken away from Congress. Many of the young people that don’t think they’ll need it, will.

It will dry up by the time I retire in 33-ish years. I find it unlikely it will impact me, as I’m not counting on it to support me. I have my own retirement plans, consisting of stocks, 401(k), pension, and savings account.

@MrItty What do you mean, “dry up?” How would it do this?

@Jaxk Where do you get the idea it takes $1,000,000 to retire at poverty level. My accounting software says that amount is just fine.

Surveys say that a lot of people don’t believe Social Security

Republicans hate it because it’s a popular, successful government program and they have fed that rumor mill for decades.

Imagine if their “privatization” efforts had succeeded. Your money would have been shoveled into AIG and Lehman Bros. execs’ pockets before the companies sank with millions of peoples’ life savings.

Under current law, Social Security is solvent until 2042. Thirty-two years is plenty of times to figure out a fix.

CBO’s 2010 Long-Term Projections for Social Security
http://www.cbo.gov/doc.cfm?index=11943

Social Security Policy Options
http://www.cbo.gov/doc.cfm?index=11580

@wundayatta I mean, the amount of money in the social security account will be less than the amount of money that should be paid out to myself and my fellow retirees.

The problem is there are more people now than there were in the 1930’s when SS first started. On top of that people are living well into their 80’s and 90’s today. Now there’s another problem because the government (both Republicans and Democrats) want to continue raising taxes (yes the Republicans are just as guilty as the Democrats here but they just go about this in a different way) and continue the ridiculous overspending.

Congress has never required that Social Security tax dollars be kept seperate from general revenues so this so-called SS trust fund does not even exist but instead money taken out of people’s paychecks go directly towards unrelated federal programs. Social Security can easily be saved if just a little of the money taken out for SS was put into a trust fund combined with cutting just a little bit of spending so an interest could be added to each person’s SS trust fund. Workers can also keep more of their own money (from less overall government spending which would result in less taxes being taken out of their own paychecks) so this extra money could be used for employees to invest this extra money as they see fit.

The well will go dry in 20 to 30 years from now so let’s act now, not until it’s too late.

@wundayatta

Simple math. $1 million at 1% (current bank interest) yields $10,000/yr. You could lock it up for longer and get a bit more but if your living on the interest, it’s hard to imagine locking in the lowest rates in decades. Stocks are fine when you’re young but not when you’re trying to retire. Too much capital risk.

As for the Social Security fund, it’s broke. The government owes the money til 2042 but it doesn’t have it. The well is dry and the only way to make the payments is to borrow from someone else’s well. The 2042 date is an accounting trick. If we can make it to 2042 by borrowing money we can make it longer or shorter by simply borrowing more or less. SS is broke.

The fact is that there is no money “in” Social Security now. It’s completely dependent upon current and future earnings… and the government’s ability to continue taxing at current levels (at least). It’s very likely that means testing will be applied to Social Security earnings soon, so that one will have to prove need in order to receive a benefit at all. (Benefits are already included in taxable income.)

What the Social Security Trust Fund (what a marvelous oxymoron that is) has is a pile of IOUs from the rest of the government that has “borrowed” from FICA for I don’t know how long. As long as you believe that the government can pay its bills… and as long as we let them cheapen the money as they always have, then there’s no reason to think they can’t do that, I suppose.

But there is a huge demographic problem looming, in the confluence of several statistics:

1. The so-called Baby Boomers are aging, retiring earlier and earlier and collecting benefits. The generations that follow them are not so populous, so a decreasing number of people will be paying benefits for an increasingly large number.

2. That retiring population is also healthier, in general, than preceding generations, and living longer.

3. The current workforce is shrinking in absolute numbers, and is having to compete with Chinese and Indian workers (to name two examples) who have historically worked for much less, and will for decades to come, so their own earnings are pinched and they don’t have room in their budgets to increase their own “contributions” to FICA when that gets proposed.

Actually, this is both a great question and one that we truly can’t answer without a crystal ball. What I can say is that at my ace (currently eligible) what happens to it won’t impact me. If things are left as they are (yeah, right) the Social Security Retirement Fund will run short of cash enough to pay full benefits to retirees in 2042. Mind you, it won’t be bankrupt. It will just have to decrease retirement payouts a bit. And if nothing is done then, the payouts will continue to decrease as time goes on until the population stabilizes.

We could easily fix that a number of ways. We could raise the amount of salary that gets taxed for the fund, fixing it at the expense of the rich. Or we could cut benefits and/or raise the retirement age, pretty much letting the poorest and most dependent on it bear the brunt of the cost. That is a political decision I can’t predict.

What I can predict is the scientific side. Medical science is closing in on why telomeres at the end of our DNA strands begin to break off and shorten as we age. That breakage impairs the cells ability to replicate themselves. When we learn how to delay or stop that process, something geneticists are closing in on, we may live to 200 or 300 and be productive most of those years. Such a change would drastically alter the actuarial tables that are currently in place for Social Security. If we worked most of those years, we could greatly reduce the FICA tax and still have plenty left for retirement when it finally came, because we would be paying in for many additional years. Only time will tell how we deal with this when and if it happens.

If you are counting on Social Security as your primary retirement income then you are in for a sad retirement. Some people talk trash about how stock market investing is sooo risky but I’ve done very well by staying the course over the last 30 years. I’ll be 60 in January 2011 and I’m not counting on getting a dine from the SS. I’ll be taking anything that Uncle sugar “gives” though me because I’ll use it to pay some of my taxes with. HA!

@gondwanalon It’s no gift. You’ve been paying for it your entire working life in FICA taxes. So take the money. It’s yours.