Social Security is on the brink of demise--sadly

Discussion in 'Social Security' started by pjohns, Feb 8, 2013.

  1. pjohns

    pjohns Well-Known Member

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    My wife and I both receive Social Security--it is a fairly important part of the mix for us, as it is with many others--so we are not at all eager to see the Social Security system implode. To put it mildly.

    Yet that is precisely what is destined to happen--and even sooner than had previously been predicted--unless something is done. And fast.

    From an article in Comcast (culled from The Motley Fool) on the subject:

    Here is the link to the entire article: 3 Social Security Shockers from the CBO’s Latest Report | XFINITY Finance Blog by Comcast
     
  2. hudson1955

    hudson1955 Well-Known Member Past Donor

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    Remember when Obama said that if we didn't increase the Debt Limit the Federal Government wouldn't be able to send out Social Security checks? Why? If Social Security payments were put into a separate fund/bank account they wouldn't be effected by the debit limit. Right? But in reality, when SS needs money to pay people they request it from the U.S. Treasury who pays them in U.S. Government Bonds that are subordinate to other Government Bonds so hence the Treasury pays other Bond obligations before honoring SSA requests. Not right, not the way it should be done, IMO. The money paid into SS is not enough to cover monthly payments to beneficiaries and we borrow a portion of what is needed to pay benefits each month. But, at the very least the money workers and employers pay into SS each month should be put into a dedicated account IMO. Because it is not, the monthly payments to beneficiaries become subordinate to other treasury bond payments. Wrong, wrong, wrong. Therefore, when they say SS is solvent, they are telling us a lie, if they were telling the truth, increasing the debt limit or not would have no effect on SS payments. Right? You tell me.
     
  3. pjohns

    pjohns Well-Known Member

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    President Obama likes to scare people--especially those who perceive themselves as vulnerable--so he can amass a coalition that will put pressure on their Republican congresspeople, in order to generate more "revenue" (translation: higher taxes) for the federal government...

    If the "lockbox" that then-President Clinton often referenced, in the 1990s, were a reality, there would be no problem.

    In fact, however, the Social Security lockbox can be found in approximately the same place as unicorns...

    Excellent points!
     
  4. Toro

    Toro New Member

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    SS should be run like a real pension plan as opposed to mimicking a government bond fund. Canada, Norway, the Netherlands and Japan have real pension plans. America should as well.

    Government bonds will earn about 4% per year. A typical 60/40 equity/bond mix will earn about 8%. $100 million invested at 4% a year will be worth $460 million in 50 years. $100 million invested at 8% a year will be worth $4.6 billion in 50 years.

    If SS were run like a real pension fund, it would be secure for centuries.
     
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  5. hudson1955

    hudson1955 Well-Known Member Past Donor

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    If SS fund was solvent and in no trouble as Obama and Dems say, SS payments would not be effected if the debt ceiling wasn't increased or if the deficit increased. Right? But that is not the case because of the way it is set up. Goggle it and educate yourselves because the money we have all paid in over our lifetimes has not been put into a "dedicated" account We have been under the wrong assumptions when it comes to what we and our employers pay into SS and for that matter Medicare.

    The Republicans are correct that after 40 years, Medicare needs revisions to make certain all of us that retire will receive some amount of benefit.

    But, also, if you have only relied on SS benefits to fund your retirement, you have totally misunderstood what the program was created to do. It was created to only supplement retirement income and not to provide enough income to pay your entire living expenses. Therefore, if you are still working and are able to, you must set up an IRA or another form of individual retirement account as you can not solely rely on SS benefits if you plan to continue living as you currently are.

    The same can be said for totally relying on the Government for anything. And, unless you are very poor, disabled you can not expect to receive much from the Government in the form of assistance. In fact, you would receive more if you had recently immigrated to this Country, applied for a scholarship when you are a citizen of a foreign country, or a U.S. born individual of an illegal immigrant as are many of the Texas landscape workers, road improvement workers, maids and so on.
     
  6. Kode

    Kode Well-Known Member

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    Only because there would be no office personnel on the job to process the checks.


    They ...AREN'T... affected by the debt limit.


    Let's do that again. In reality, when SS needs money to pay people they first take it from current payroll tax revenue, and then make up any difference by redeeming an equal value of Treasury securities from the S.S. Trust Fund.


    Good. Because that's not how it's done.


    No. Wrong. Completely wrong. NOTHING is borrowed to pay S.S. current obligations, -ever. It -ALL- comes out of savings of excess payroll tax funds from the past.


    That is apparently because you don't well understand how S.S. was designed and how it works.


    That's correct, -you are wrong, wrong, wrong. S.S. is a stand-alone system, self contained, self-funded, and adds nothing to the debt.


    OK, I'll tell you: increasing the debt limit doesn't have any effect on S.S.

    Even the way they redeem the Trust Fund Treasury securities keeps debt stable. When the Treasury is asked to redeem some of the Trust Fund securities, the Treasury (which owes the money to SS already) sells a matching value of Treasury securities on the open market to private investors, pensions, mutual funds, and largely to foreign investors. They then give the proceeds of that sale to S.S. and S.S. "retires" (destroys) the matching Trust Fund securities. This simply moves the owed Treasury investments out of the Trust Fund and into the private arena. The debt remains unchanged.

    So all this connection with debt is confused, inaccurate, and therefore worthless talk.
     
  7. Kode

    Kode Well-Known Member

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    Latest reports from the Trustees is that SS is improving and actuarial study shows it will last a little longer given current conditions.
     
  8. Old Man Fred

    Old Man Fred Well-Known Member

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    Obama's comments were an admission that he would violate the 14th Amendment and commit treason against the US Constitution. His sole mission was to destroy our republic.

    Democrats seem fixated that "privatizing" Social Security would somehow be a giant giveaway to Wall Street, even though there's a perfect model on how to do it with ridiculously low management fees.

    The Federal Thrift Savings Plan has the lowest fees of any investment plan in the country, is incredibly simple, and has been extraordinarily successful. What they are terrified of is that privatizing Social Security-a purely Republican plan-would effectively address their biggest arguments; income inequality, wealth inequality, and economic stability.

    I put $4/hr into my 401(k), along with an additional $360/mo into my Roth. At very conservative projections I should have about $2,000,000 in retirement savings by the time I retire. Yet right now at the average SS payout one can only expect $312,000 in benefit if they live to 85.
     
  9. Kode

    Kode Well-Known Member

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    That tells us all that you're an extremist partisan.


    Let's see if that's realistic.

    What is your current age?
    At what age do you plan to retire?
    What return can you get on your investment?
    What is the money invested in?
    What average rate of inflation do you assume?

    To reach that goal, if you're age 25 and you retire at age 65, you will have to get a reliable annual average of 6% return. And that $2 million will get you an $80,000/yr income for life, adjusted annually for inflation. But with 3% inflation between now and retirement, at age 65 that $80,000 will have the buying power of $48,000 today.
     
    Last edited: Aug 26, 2017
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  10. Seth Bullock

    Seth Bullock Well-Known Member Donor

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    Give a little thought to the nature and behavior of our politicians, pjohns.

    They are followers, not leaders. True leadership is judged by them to be dangerous to their political careers, and the safe thing to do is to follow public opinion and to always seek political cover when hard decisions need to be made. Consequently, I think it is doubtful that true leadership on future Social Security solvency is going to happen at the present time. Same with Medicare. They will simply kick the can down the road because there is no crisis in the present.

    But ...

    When the time comes, and SS is forced to cut benefits due to a lack of funds, the political pressure of public opinion will give them the political cover they need, and they will follow that public opinion. So, in my opinion, as the crisis looms, they will act. There will be some sort of tax increase to keep the system solvent, and that will be that. They will then cast themselves as heroes of the people and pat themselves on the back for the cameras, all clamoring to take credit for their brave and compassionate vote to protect the elderly. :clap::clapping::applause::winner:

    Gotta love them politicians, eh?

    My two cents ... Seth :oldman:
     
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  11. Old Man Fred

    Old Man Fred Well-Known Member

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    Obama was a "Constitutional Scholar", which means that when he publicly admitted that he would stop the payment of Social Security benefits or interest on the national debt, he was threatening Congress with treason. In no way is that partisan, outside of the fact that every elected Democrat was an accomplice to said treason.

    I'm 27, have been diligently saving since I was 12, have averaged a 15% return on my investment, although assume an 8% return, and I have a pension, generous employer contribution to my 401(k), and own a few rental properties already.

    If I can bring $100,000 in purchasing power to the table between my savings, pension, and SS, my wife will be extremely happy.
     
    Last edited: Aug 27, 2017
  12. Old Man Fred

    Old Man Fred Well-Known Member

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    And I plan on retiring at 62, although not collecting SS until I hit my maximum age, and invest in value stocks with high yields coupled with covered calls/secured puts, real estate, and tax liens(obviously not all within specifically "retirement accounts")
     
  13. pjohns

    pjohns Well-Known Member

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    Actually, I cannot disagree at all with most of what you have said, above.

    One addendum, however: Rather than cutting benefits dues to a lack of funds, the politicians are likely, I believe, to just raid the general fund. (This would hardly be unprecedented.)
     
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  14. Seth Bullock

    Seth Bullock Well-Known Member Donor

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    Yup. Very likely.
     
  15. Old Man Fred

    Old Man Fred Well-Known Member

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    Social Security has cost taxpayers outside of FICA trillions of dollars throughout it's life, so I wouldn't be surprised at all
     
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  16. gamewell45

    gamewell45 Well-Known Member Past Donor

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    That's assuming the market remains strong and you make good election choices for your investments; if you make bad selections or the market crashes, then all bets are off and you could end up with virtually nothing to live off of. Social security is your safety net; remove that and you could end up with millions of seniors with nothing to live off of.
     
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  17. Old Man Fred

    Old Man Fred Well-Known Member

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    When has the market ever truly crashed? When it does it goes right back up. People seem to think that you buy stocks for appreciation, but you don't. I bought shares of GE for $25 around 09/10, just like my grandfather did in the 50's. My father paid $24/share for Intel in the 70's, and I paid the same price in 2013.

    Shares pay dividends, and shares split. That's where wealth comes from. Not the wild roller coaster you're imagining.
     
  18. Kode

    Kode Well-Known Member

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    Can you document that cost?
     
  19. Old Man Fred

    Old Man Fred Well-Known Member

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    The Social Security Trust Fund, as well as the $210 billion from when Obama gutted Social Security.
     
  20. Kode

    Kode Well-Known Member

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    I see you worded it cryptically because you don't have reliable facts. Suppose my reply were "Investment in foreign income, as well as obsolete military hardware"? Do you get what I'm saying? I didn't think so.
     
  21. Kode

    Kode Well-Known Member

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    CAN. YOU. DOCUMENT. THAT?
     
    Last edited: Sep 11, 2017
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  22. Old Man Fred

    Old Man Fred Well-Known Member

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    You pay FICA, and FICA gets turned into SS issue Treasury bonds. The interest on those bonds have paid for Social Security for decades. That interest came from non FICA tax dollars.
     
  23. Old Man Fred

    Old Man Fred Well-Known Member

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    In addition to the $221 billion in interest paid to public holders of the debt, the general account also paid $106 billion in interest to the OASDI funds for their holdings of Treasury securities; but because the Treasury simultaneously borrowed those interest payments back, a separate operating cash transaction was not necessary. This does not mean that the OASDI holdings have no effect on the operating cash payments. If the trust funds had not held the Treasury securities, equivalent amounts of additional Treasury securities would have been held by the public, and the cash interest payments to the public would have been the full $327 billion in interest on the public debt. However, with the trust funds holding some of the Treasury securities, only $221 billion in cash was needed for interest payments to the public. The cash outflow for interest payments was thus reduced by $106 billion from what it would have been if the trust funds had not held the securities. This change in the interest payment cash flow is indicated in Table 1, inset A.20

    Just below Table 1
    https://www.ssa.gov/policy/docs/ssb/v75n1/v75n1p1.html

    $106 billion in interest paid in a single year is a lot of non FICA dollars
     
  24. Kode

    Kode Well-Known Member

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    Maybe at some point, but not yet. Do you know how Trust Fund Treasuries are redeemed?
     
  25. Old Man Fred

    Old Man Fred Well-Known Member

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    I am aware. Regardless of whether or not they have been redeemed a liability has been recorded, and interest paid.
     

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