Home > Uncategorized > Social Security – Something For Everyone To Be In Arms About – Looking For Leadership And The Long-Term Plan – Are You Age 35 Or Younger?

Social Security – Something For Everyone To Be In Arms About – Looking For Leadership And The Long-Term Plan – Are You Age 35 Or Younger?

August 11, 2012

Another day, another article about social security unsustainability. From the Associated Press, Click Here for the article.  I haven’t verified the numbers in the article, or the reference to the 2011 study, but over the years I have read enough about the numbers and that the social security program is not sustainable to conclude that the numbers in the article most likely are within the range of reason.

The problems with the social security program have been known and talked about for years.  But there is no Congressional or Presidential leadership to achieve long-term sustainable resolution. Meanwhile, the problems get progressively worse.  Most likely a 10 million person march is required to get any movement toward resolution.

Can you imagine, why would anyone age 35 or less want to drop money into this program?  But on or about the 15th and last day of the month, month after month, the average person and his or her employer continue to pay the 12.4 percent tax on wages (temporarily reduced by 2 percent).  Per the article, the social security tax on wages didn’t pass 6 percent until 1962.

Also according to the article, a married couple retiring last year after both spouses earned average lifetime wages paid about $598,000 into social security.  Now, I cannot determine from the article if the $598,000 is the worker portion of the tax, or both the worker and employer portions, as the total tax payment is divided in half and paid by both.  Obviously the total paid-in amount would be much higher (like double) if the $598,00 is only the employee paid amount.  Is is clear, however, that the paid-in amount does not include any factor for investment appreciation over all of those years.  Can you imagine how high the amount paid-in should be if it reflected appreciation as an investment?  In other words, if properly reported to include investment appreciation the $598,000 should be much higher.

Nevertheless, according to the article, that same couple, if they live sufficiently long, is projected to receive $556,000 in benefits, paid over time of course.  In other words, already less than they paid in, without any factor for appreciation, loss of opportunity, or the time value of money.

But the numbers get worse.  The “fund” is projected to be out of money in 2033.  56 million people receive social security benefits now.  Projected to be 91 million people in 2035.  In 1960 there were 4.9 workers paying into the social security system for each person receiving benefits.  Currently there are 2.8 workers paying for each recipient.  In 2035 that number is projected to drop to 1.9 workers.  And, in the future payments to recipients are projected to drop, or the tax on wages will be increased yet again, or both.  As bad as it might seem right now, you are currently viewing the “good” times.

All of this information is known and has been known by Congress and the President for years.  They do nothing for fear that they might not get re-elected.  Meanwhile workers are forced to continue paying into the program.  Congress and the President have their own separate retirement system.  I hear the benefits are very good.

We can all acknowledge that Congress and the President, through multiple administrations, have failed to address a resolution to the problem long-term.  And we can all acknowledge that as a result, the answer for a long-term resolution has become painful.  By long-term, I mean a resolution wherein the program is sustainable.  Not 10 years, or 20 years, or 30 years, but sustainable ongoing.

If it was my vote, I would not put another dime into the system until the sustainable resolution is enacted, and I would put Congress and the President into the social security system and abolish their separate programs.  And if I was someone age 35 or less, I would certainly put resolution of the social security program on the top-level of my political voting agenda.

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