Jim, why do you think they are talking about it as a scary issue? If you are on the outside, and you are trying to get in, what better way than to point at those who are on the inside and say, “These folks are making it so that you will be [insert favorite bogeyman here]!” Social security is a bogeyman, and an easy one to employ because no one without some significant accounting and financial background can really know for sure what is going on with it. Thus, the common masses cannot easily be educated to understand that it IS a bogeyman.
In short, it’s politics as usual. <sigh>
Which is NOT to say that there don’t have to be adjustments made, but they do that all the time, so it’s not that big a deal…
I would add that the “big deal” is some percentage, [probably less than 75% but more than 25%, but I am not sure what the exact number is] are entirely or so-close-to-entirely-that-it-doesn’t-really-matter dependent on Social Security to retire at all.
Because the hype has been just that - hype. A lot of it has been for the purpose of creating popular support for hefty changes to Social Security. It’s hard to get public support for fixing a program that ain’t broke, so…
One’s future benefits increase with wage levels until one begins drawing Social Security benefits, and then they go up on a modified cost-of-living basis. This means that the future benefits they’re talking about are considerably greater than today’s, relative to the cost of living. It’s those benefits that may have to be cut 25-30% in 2041 and beyond, if we don’t do anything at all.
IOW, if we do nothing at all, and benefits have to be cut 25% in 2041, the benefits of the typical new retiree in 2050 will still in all likelihood have more purchasing power then, than do the benefits of the typical new retiree today.
We might want to do something about that, but if we didn’t, it wouldn’t be the end of the world. And it’s the sort of thing that can wait for a solution a few years down the road, after we’ve dealt with more urgent problems - global warming, the increase in health care costs in America (which threatens the actuarial health of Medicare much sooner and more severely than Social Security is threatened), stuff like that.
Note the words “intermediate assumptions” at the beginning of the quote. There are also a set of optimistic and pessimistic projections, which are shown in a graph at the bottom of the page. Under the pessimistic assumptions, the Social Security trust fund empties out about 10 years earlier. Under the optimistic projections, the trust fund never runs dry.
So the best-case actuarial scenario is that a fix is never needed. The worst-case actuarial scenario is that benefits need to be cut 25-30% in 2031, from a substantially higher benefit level than we have now.
That’s what the system actuaries say, and AFAIK, nobody’s ever challenged their integrity or accuracy in any way that’s been specific enough to be meaningfully debated.
What is projected to happen (under the intermediate projection) is that the government will have to pay back, between 2027 and 2041, the money it’s been borrowing (and paying interest on) from the Social Security trust fund. As that happens, the Treasury will have to find other lenders to replace Social Security, and the rate of interest probably will be slightly higher.
Really, the best thing to do about Social Security right now is to get the General Fund’s finances in better shape, so that it won’t have to borrow so much money down the road.
Thank you for this excellent post. This turned into a very educational thread. I still won’t be relying on SS to retire, but it sounds like it will make it a lot easier once I hit around age 70.
I will cease spreading doom and gloom about it in the future. I have been guilty of this for quite some time.
Thanks muchly. I wouldn’t want to rely on SS for the bulk of my retirement, since I plan to continue to live the upper-middle-class lifestyle until they wheel me off to the nursing home, and SS certainly won’t support that by itself.
But I feel comfortable in relying on it as one leg of a triad of funding sources for retirement, with the other two being employment-based retirement funds, and my wife’s and my personal assets and investments. Between all that, life should be good, say, around 2023. And for those who work at WallyWorld and probably won’t have anything besides Social Security when they retire, I’m damned glad it’s more secure than the rumor mill makes it out to be.
My daughter’s boyfriend is going nuts, because his parents are doing exactly this (though his mother has a pension which might help.) SS isn’t designed to provide a complete middle class retirement income. It will be there.
Given the average debt. and the average savings, I’m betting we will able to hire retired people as servants cheap when we’re retired.
One last thing. You’ll see if you look at your report that you get significantly greater benefits if you put off drawing them until later - 70 is pretty good, IIRC. But you have the choice. It might even be worth eating into capital a bit to put off officially retiring until later - I haven’t run the numbers, so I’m not positive.
Medicare is far the bigger problem. Maybe we’ll have UHC by then so it won’t be as much of an issue. (Because overhead will be decreased in a single payer system)
RTFirefly, I think I recall reading that in the past the optimistic scenario has been the most accurate. Do you remember seeing this? That’s no excuse not to plan for the intermediate one, of course.
Can someone else elaborate on this. Is it just the “I’m sick of working and want to retire NOW” opinion that makes supporting raising the retirement age such a death wish politically or is there some actual logistical problems with it too?
An index fund should prevent that, not that an index fund couldn’t go belly up though. But if all the companies in an index fund are going belly up, there are bigger problems in the world.
I guess I should stop being surprised at how many ostensibly intelligent folk insist on manitaining ignorance, rather than taking the minimal steps that would dispel their groundless concerns.
Thanks, RTF, from saving such folk the trouble of a 30 second google search (or the 5 seconds it would take to type www.ssa.gov).
I heard it too, but I don’t have anything handy to support it with, and I can’t remember who it was who made that claim, or what sort of supporting evidence they had. So I wasn’t going to say anything.
IIRC, these claims were made in some blogs (I’m guessing one was Eschaton, since Atrios has a background in economics) back in early 2005, when Bush was trying to ‘fix’ Social Security. And again IIRC, the claims were that in the preceding years, the data had been falling in between the intermediate and optimistic projections.
But like I said, I don’t have anything solid - just recollections that people said this.
Of course, if they go there and find the Q&A about Social Security’s future, they’ll encounter a slanting of the facts that makes the whole thing sound a good deal scarier than the Trustees’ Report makes it out to be. So the SSA site plays on both sides in the battle against ignorance.
Because I’ve posted exactly such facts and links in any number of SS threads in the past, and I guess I didn’t feel like it this morning.
For someone to say I am expecting [SS] not to be there [when I need it] betrays an almost willing ignorance. (Another aspect of ignorance reflected in such remarks is each individual’s inability to predict when he or his relatives might become eligible for SS bens.)
It is very easy for anyone with a passing familiarity with the internet to find the current projections concerning the trust funds, as well as the implications should nothing be done in the meantime. Yet, for whatever reason, a huge number of people apparently get some satisfaction from repeating this utterly ignorant statement. IMO, your statement indicated either ignorance, or a desire to score some other policy points.
Well, I will accept the ignorance point, but as I pointed out, I have never been in one of these SS debates before. I have no clue what policy points could be scored as candidates on both sides have talked about SS would fail in upcoming years.
I am sorry you can be bothered to throw insults into an already resolved issue and yet not be troubled to back it up with these quick Google links. My Google-Foo was no help a few nights ago and it was not until **RTFirefly’s ** really excellent posts (in striking contrast to yours) that anyone really cleared this up for those of us that did remain ignorant.
I will be 65 in December of this year, and will be eligible for full benefits at age 65 + 10 months. At that time the amount will be about $1200 a month. I don’t intend to retire yet, but I may take that sum per month and make sure that I don’t make a taxable income over the limit at which my benefits would be reduced.
I never figured SS would be enough to live on in my old age.
One of the big problems with SS AFAIK is the large portion of the fund that has been used by the government by “borrowing” from SS, contrary to the way it was set up originally.
Originally people got more money than they put into the system, which was the point. As for borrowing, the money gets put into government bonds, which is by definition the government borrowing from the system in a sense. I suppose that it could have been put into stocks from the start, but I suspect that this didn’t seem like such a good idea 4 years after the 1929 crash. I think the real problem, if I got it right, is that borrowing from SS makes the actual deficit seem smaller.
BTW, I think I read about the optimistic projection in Krugman’s column in the Times. I’ll see if I can find it and if he gives a cite.
papaw, I bolded the phrase above. If you wait until the age when you get full SS, there is no limit to the amount you can earn without having the SS benefit reduced. And the amount of the SS keeps going up as long as you work and pay into the system.
And for those who work at WallyWorld and probably won’t have anything besides Social Security when they retire, I’m damned glad it’s more secure than the rumor mill makes it out to be.