There’s no good news on Social Security.
In fact, the news that just came out was worse than expected. Retirement in America has a whole new meaning now. And that’s not even as bad as it gets…
$3 Trillion Worth of Lies
Last week, the trustees of the Social Security Trust Fund came out with revised statements about the trust backstopping the so-called “entitlement” program known as Social Security.
You know Social Security; the retirement program we pay into and our employers pay into that our generous politicians call an entitlement, as if we’re entitled to our money eventually, thanks to them.
That entitlement program, which we pay into in the form of payroll taxes, goes out to beneficiaries collecting payouts now, and if there’s more money collected than paid out, it gets “invested” in the trust fund.
That trust fund supposedly has $3 trillion in it.
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Well, last week, the trustees said that they’re going to have to dip into the fund to pay benefits because there’s not enough income flowing in to offset payments to current beneficiaries.
That’s not good, because in last year’s Annual Report by the trustees on the health of the trust fund, they said they wouldn’t have to dip into the piggy bank for another four years.
Today, over 61.5 million Americans (and apparently others, too) get Social Security benefits.
Here’s what’s happening:
There are fewer workers getting their paychecks tapped by payroll taxes to pay beneficiaries. In 2007, there were 3.3 workers contributing money for every one beneficiary. In 2017, there were 2.8 workers working to help pay benefits to retirees.
So, either the trustees are idiots and can’t do simple math, or they’re liars.
Technically, they’re not complete liars, in that the trustees of the Social Security trust fund are actively lying to us. But there isn’t $3 trillion in the Social Security Trust Fund.
There isn’t a single penny it.
One way to explain how you’ll know it’s a lie is by looking back at what happened in the summer of 2011.
With the threat of the government shutting down because a debt ceiling vote was being kicked around, President Barack Obama answered CBS’s Scott Pelley’s question about whether the President could guarantee that Social Security checks would go out on August 3, the day after the government was supposed to reach its debt limit.
President Obama answered, “I cannot guarantee that those checks go out on August third if we haven’t resolved this issue. Because there may simply not be the money in the coffers to do it.”
What the budget crisis that summer exposed was the lie about the solvency of the Social Security trust fund.
Back then, the trust fund supposedly had $2.6 trillion in it. If there was no more government money coming in because the debt ceiling prevented the Treasury Department from issuing more debt to get their hands-on cash proceeds, what difference would that make to Social Security beneficiaries? All that had to be done was to go into the trust fund and take the money for payments out of the $2.6 trillion pile of cash they supposedly had invested.
That wasn’t going to happen, because it couldn’t happen. That’s because there is no money in the so-called trust fund.
The Only Way to Retire
Not that a lot of people were listening back when Bill Clinton was President, but in 2000 his Director of the Office of Management and Budget (OMB), Jack Lew, explained that the trust fund “balances” are nothing more than a “bookkeeping” device. “They do not consist of real economic assets that can be drawn down in the future to fund benefits,” he said.
In other words, the Social Security trust fund contains nothing.
When FICA tax is taken out of your paycheck, almost all of it goes to pay current retirees. The rest, if there is any, goes to the U.S. Treasury. There, it’s spent on roads, bridges, national defense, or whatever they want to spend it on.
When Treasury takes money out to the trust fund, which it has been doing for decades, it sends the Social Security Administration an IOU – technically called “special issue” bonds.
They are nothing more than “claims” on the Treasury, which can technically be financed by raising taxes, borrowing more from the public, or reducing benefits or other expenditures.
That’s what it means to have a so-called trust fund with no “real economic assets.”
When you retire, the “trust fund” will have to go to the Treasury for the money for your Social Security check.
According to the OMB, “The existence of large trust fund balances, therefore, does not, by itself, have any impact on the government’s ability to pay benefits.”
There’s no easy way to fix the hole politicians have dug for retirees expecting Social Security benefits by spending all their money, except maybe raising the retirement age, tweaking the indexing formulas and means-testing so rich peoples’ checks are redirected.
And none of that is palatable.
What’s left is you looking out for you: your saving and your investing.
And if you are currently age 50 or older and enrolled in Social Security or collecting on behalf of a spouse… It’s critical that you pay close attention.
Several audits by the U.S. Inspector General have found tons of errors in the processing and payment of Social Security checks.
These reports determined that, for the last 33 years, a massive group of recipients has been underpaid – drastically underpaid.
As a result, these people who have filed to collect certain benefits may be collectively owed hundreds of millions in underpaid checks.
Most victims of these errors have no idea they could be owed money – a sum that could equal $23,441.