Skip to comments.Social Security: The Unsustainable Promise
Posted on 10/18/2013 9:41:16 AM PDT by Kaslin
I have written numerous times about pension problems in the US. Let's cross the Atlantic and take a peek at the setup in Spain, then let's compare the two setups.
Via translation from Libre Mercado, please consider The Chart That Will Shake Future Pensioners.
Workers vs. Pensioners
Given that eight million people age 65 and 16.7 million workers cannot sustain the current pension, imagine what will happen in the coming decades as the differential goes back even closer.
Pensions today promise Social Security payments of 100% of the average wage in the last 25 years for those with 37 years of Social Security contributions. Such payments are absolutely unsustainable. The relative income of pensioners relative to the average income of the society will sink (without massive tax looting of active workers).
Immigration could partially alleviate the problem, making the demographic transition somewhat smoother, but if new rights accrue to future pensions, immigration only delays the problem. In any case, it might be a good idea to allow free immigration to Spain in exchange for not accrue rights to Social Security.
The most important practical advice to draw from the above chart is simple: save and invest. If you trust your retirement to politicians, you will end up poor and feeling cheated.
Total Annual Cost of Social Security 1967-Present
Social Security Beneficiaries vs. Total Non-Farm Employment
Ratio of Workers to Social Security Beneficiaries
Social Security Benefits Analysis
The system is currently running a deficit. Trends say that deficit is going to worsen with each passing year unless benefits are cut and/or taxes are hiked.
The next chart is courtesy of Reader Tim Wallace in a January 11, post.
Social Security Burden on Non-Farm Workers
Social Security Cliff Reading
Tip of the Iceberg
Unfortunately, Social Security is just a tip of the unsustainable payout promises problem. Public union pensions are trillions of dollars underfunded and several cities in California have gone bankrupt over those promises.
Detroit went bankrupt for the same reason as did Central Falls, Rhode Island (see Central Falls Set to File Bankruptcy Exit Plan; 50% Pension Reductions, 40% Slash in Police and Fire Budgets Coming Up).
Vallejo Round Two
Vallejo, California went bankrupt about two years ago and is headed there again because it did not shed pension promises in bankruptcy: Vallejo, Mired in Pension Debt Again; Lesson for Stockton and Detroit - Shed Those Pension Obligations Now!
As I said in the above link, Stockton and Detroit have a choice. They can cut pensions now, or cut them later in a second bankruptcy, just like Vallejo will.
Pension Promises Not Sacrosanct
Yet people keep emailing me that pension are guaranteed by law. Tell that to residents of Central Falls. Their pensions were cut 50% in bankruptcy.
Here's reality: haircuts are coming. Unions need to negotiate benefit cuts now, in a sensible manner (with the highest beneficiaries taking the biggest cuts). The alternative is across the board benefit cuts à la Central Falls.
Meanwhile please consider the solid advice from Libre Mercado:
"The most important practical advice to draw from the above chart is simple: save and invest. If you trust your retirement to politicians [or promises], you will end up poor and feeling cheated."
I mean, nobody has actually spent that money already, right?
Ha, ha, the answer is to save and invest? So that politicians can inflate away the value of your savings and/or just confiscate it as they have done in other countries?
Somebody please come up with a better answer than that!
I hope to draw my last SS check the day I did, if it lasts that long. After that, I don’t really care. Selfish, ain’t it.
....last day I died......
Government - The Unsustainable Promise.
How come we never hear about Welfare running out of money?
What's interesting, the first group "worked for" their money...
the second........ didn't!!
I earned it, I deserve it, I sacrificed for this country, I WAS PROMISED, I payed into it, I worked hard,
It is all I have, I will starve, I paid so can you, the politicians stole it, it is mismanaged, cut the other spending first
Did I miss anything? Social Security is a social income transfer scheme designed to beholden the middle class to the Democraticm Party. Other wise known as welfare. It has been hugely successful just as Obamacare will be.
First, since you have so many wonderful numbers and charts there to tell the story, how about a few that actually tell the story, like:
- What percentage of people currently receiving a Social Security check (OF ANY TYPE) paid into the system for more than 20 years? What percentage of people currently receiving a Social Security check (OF ANY TYPE) never paid a penny into the system?
- What would happen to the ‘problem’ if the Social Security Disability rules of 1980 were put back into place?
- What would happen if we took the over eighty (80) Federal programs that welfare has been scattered into and totaled it? What would be the single biggest amount spent by the Federal Government? Would it be larger than Social Security and the Military spending combined?
- The good news is that for every day that thousands of baby boomers turn 65, hundreds die. That ratio will continue to evolve until on any give day more will die than will turn 65. And one day they will be gone altogether. Then, assuming there is a country remaining, the poor naive sheeple remaining will suddenly have the light come on and realize the problem has been right in front of them all along.
And NOBODY, not even the most far right politician, wants to talk about the real problem - we are going broke because millions of worthless cancers are happy to sit on their a$$ everyday and let the government pay them.
(And if any of the facts and figures I through out seem bogus, go to the website of a group called the Heritage.org and they will show you in black and white what the truth is.)
The reason Social Security isn't stopped is the payments going in from the young are still feeding the slush fund. In a few years the liars in government today will be talking about ObamaCare being an ‘entitlement’ and they'll try to force people to keep paying while dumping everyone except the most loyal democrat supporters.
Liberal la la land:
where gubmint pensions are a holy sacrosanct sacrament and marriages are no-fault divorces for Adam and Steve.
You did not pay into anything and there is no account with your name on it. What you paid for was the SS that went to your parents and grandparents. There was nothing put aside for you or anyone else.
Finally, if there were more than 2 workers for each recipient, the system would be better off.
Maybe if the Pres. and Congress would make this country economically viable again, that would also help the system.
We need to move to the Chilean model which seems to work very well and retirees get more money montly than SS here in the states. Newt was touting it in the 2012 campaign. Or private accounts that move with you from job to job.
There are lots of answers but if we do that the govt won’t be able to steal the money that we have all paid monthly for our whole lives. Right now all of that money gets sucked up by Uncle Sugar every month.
“save and invest”
Your response only takes into account the ‘save’ part of that. There are many investments (stocks, real estate, etc.) that do quite well in an inflationary environment, so do the saving so you have money to invest wisely.
But, but we were promised! Here is what SSA said about the system back in 1964!
From the SSA website (You have to hunt for it!)
“The program is designed so that contributions plus interest on the investments of the social security trust funds will be sufficient to meet all of the costs of benefits and administration, now and into the indefinite future—without any subsidy from the general funds of the Government.
Both the Congress and the Executive Branch, regardless of political party in power, have scrupulously provided in advance for full financing of all liberalizations in the program.”
And HERE is where YOUR MONEY went. Read and weep.
Yep. Bond investors won’t be the only ones to take “haircuts.” Those will be passed on to the consumers (pensioners).
I retired at 62 and regard at least part of my monthly SS check as a fee payable for democrat cowardice in abandoning those of us who were winning in Vietnam.
You silly person. Didn’t you get the note from sky guy that you’re supposed to give up on your money? I bet he has a vested interest in our giving up the money. To him.