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."
Govt pensions, and military pensions. They contributed and earned them.
So the cop who retires at 50 years old and collecting $80,000++ per year in tax paid government pensions on top of those gold plated government medical benefits are perfectly legitimate?
I hear you. I am a baby boomer too. I don’t remember what the % contribution rate was. I do seem to recall that 16 workers support 1 retired person. Now it’s like 3 people supporting a retired person.
Boomers are given a bad rap, like we were all a bunch of raving idiot liberal hippie type pot heads. Tain’t true at all. Out here in fly over country plenty of conservative, bitter clingers.
The rates were raised, and I don’t remember hearing a single person gripe about it. We knew that granny and our parents were dependent on it.
I know I have done all I could to help my kids and my parents, and be able to stay self supporting. I don’t want my kids to have to send more than half their paycheck to the government-that’s for sure.
I know a cop who retired at 25 years and collects a State pension, who will eventually collect a Federal pension. I wish I had that but I will not.
Let me ask you though...are the .0000046778 % in this country who fall into that category causing our fiscal collapse, or is it Medicare, Social Security, Disability, and Medicaid? I can show you a chart.
I’ll start getting my SS checks very shortly (God willing) and I am looking forward to that! I’ll use that money for my boat payments, casino trips, and vacations. I will, however, be quite willing to forego those checks for the good of the nation and our grandchildren...
...AFTER you cut off the Democrat party’s base of moochers, bums, deadbeats, and parasites from welfare, food stamps, WIC, “free” school breakfasts and lunches, Section 8 housing, Obamaphones, Medicaid, SSDI “crazy checks”, government services for illegal aliens, etc.
THEN talk to me about trimming back benefits for us seniors who dumped their hard-earned money down the government toilet their entire working lives.
Until then, everybody can STFU.
Excellent post. I’m with you 100%.
it's the double whammy....
in my husbands family, we support his father, his mother, his brother, his sil, his sister and her husband who are both "disabled"(thru a shyster lawyer of course)and at least one deceased nephews child until he is 18....the rule about how many people are working to support just one SS recipient shows insanity...and in my husbands family alone the two of us working while the rest are collecting is INSANE...
Taxes are taxes...we Can discuss that.
Unearned are SS Disability (which is helping to bankrupting the SS system), TANF welfare, EBT Food Stamps, Unemployment (sorry, it is unearned after a few weeks), Section 8 housing, and these:
There you go! You have nicely listed the priority in which government needs to trim back spending. Once the "unearned" (welfare) crap is trimmed to the bone, THEN let's talk about reforming the "earned" stuff.
Are you kidding? You know who the biggest employer in America now is?
It’s governemnt...Government pensions at all levels are literately economically gang banging the American private sector.
This is no secret.
Elect a White House and Senate, then convince the American public (who every day turn more away from God) and then.........magic. We will have what you want.
Those IOU’s SS holds are essentially worthless because to make good on them Treasury has to sell new debt to redeem them.
It may get down to just what “Entitlement” we want to save as we can’t have them all. So take your pick.
It’s all been funny money since we went off the gold standard. Redemption of the SS bonds actually lowers the national debt-it’s all done with accounting entries.
The main point is that the Administration can choose to send out the Social Security checks by combining the current inflow with redemption of the bonds, and it doesn’t require the raising of the debt ceiling to do so.
Hence, any such decision would indeed be totally the decision of the spite house for no other purpose but political blame. It’s an easy accusation to make because most people don’t understand the actual situation.
They have heard for years that politicians have stolen the money and left a bunch of IOUs, so that a raise in the debt ceiling is necessary-it ain’t necessarily so.
I understand well the sentiment regarding the “theft” and the IOUs etc. However, just accepting that mantra, makes it easier for Dems to manuver stuff their way. I choose not to allow that latitude.
The redemption of the bonds already started during the Obama Administration - ahead of schedule. Not much is made of it, other than to note that Social Security is no longer receiving an excess.
The only time there is a big hullabalu is when the Dems want the debt ceiling raised. It’s just another example of them making misleading statements to influence and scare an uninformed group of the electorate, so that they can get their way and continue on the march to serfdom.
It has been interesting for me to watch and observe in the past 10 years the amazing "private sector" that thinks it is so holy and pure. Restaurants all across American are driven by Social Security checks. I was training as a military officer to serve overseas, and the condo I was staying at in Florida had an Olive Garden outside. They had a "Social Security Nite" sticker outside and on that night the place was packed.
There are millions currently spent by WalMart and grocery shoppers to up the Food Stamp bill beyond the $135 Billion currently spent. Without that money, many grocery chains will go bankrupt, and that is a fact. I also am sickened by it.
The US Govt is way to big and intrusive, that we agree upon. But people who think spending is unrelated to local and national economy's are delusional.
Oh, I forgot to mention, without Federal money, most hospitals would go under. Our obscene spending on Medicare and Medicaid are outrageous. I had a nurse who went off on how she was "independent" of anyone, and when their Medicare reimbursements were reduced she was fired. But she was a "private sector" fire.
This is one of the problems that Obamacare was designed to resolve.
By killing off a lot of old people through the death panels, it will go a long way toward accomplishing that.
Its governemnt...Government pensions at all levels are literately economically gang banging the American private sector.
BTW, did ya know there are now more unionized government employees than exist in all of private sector America?
It has been interesting for me to watch and observe in the past 10 years the amazing "private sector" that thinks it is so holy and pure.
That's a really odd response....
Restaurants all across American are driven by Social Security checks
Was that not the money government confiscated from them in the first place?
Critical access hospitals rely on federal money quite directly. Medicare pays very little of what true costs are, but they do pay I suppose.
If you jump to Obama’s tunes correctly, they will pay.
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