Social Security’s Finances Erode Further and Could Spell Benefit Cuts

[Bullseye]

Hmm… they ‘contributed’ enough (while working) to generate a surplus which was placed into the SS ‘trust me’ fund, why shouldn’t that continue to be the case?

In "the good old days". FICA exceeded the amount paid out; the excess was "loaned" to the federal government. That's no longer the case. To meet today's requirements SSA has had to cash in those bonds; when they're depleted SS becomes a cash in/cash out business. SSA announced the other day that will happen some time in 2034.

 

[TobyOne]

They just need to stay off my lawn.

The young’s appetite for taking another hit may be less than you hope.

 

[tharock220]

Let's see:

• Mortgage/Rent
• Home maintenance
• Home Insurance (Property of Rental)
• Property Taxes
• Car (Maintenance and Gas)
• Car Insurance
• Medicare Part B ($185 a month in premiums)
• Medi Gap Insurance (about $150 a month in premiums to help with what Medicare doesn't cover)
• Medicare Part D (Prescriptions, another $150 a month in premiums)
• Long Term Care Insurance if you get sick and have to go into a home so that your children don't get crushed with the bills
• Dental Insurance (which isn't covered by Medicare, you know in case you want be able to chew your food)
• Vision Insurance (which isn't covered by Medicare, you know in case you want be able see)
• Food
• Clothing
• Electricity
• Heating Gas/Oil (so you don't have to freeze in the winter)
• Water to be able to drink, bathe, wash dishes, wash clothes, etc.)
• Sewer (because you don't just get charged for the water going into your home, you have to pay for the water to leave it also)
• Then there might be some extras like a phone to talk to the kids and grand kids, Internet to try to keep engaged

Just couple of things off the top of my head.

WW

If you have a mortgage or rent to pay, then it's not time to retire.

That generation also helped to create the SS surplus (trust fund) by their own (over?)payments, which will soon be exhausted if nothing is done.

Indeed. The surpluses were poorly invest. I think you'd agree.

Are you calling me a liar?

Nope. But actions speak louder than words.

Yep, I could become a lot poorer in about 8 years.

That would definitely suck. I'm happy my company, Shell, has made changes to its pension plan to reflect the changing workforce. Such actions aren't quite so hindered by politics in the private sector.

Retirees still eat, need a place to live and many other things.

See above.

You ever felt the satisfaction of paying a car off? Imagine what that will feel like when you send your last mortgage payment. I haven't seen had the privilege yet.

 

[WorldWatcher]

As a Boomer I've already had 3 cuts to Social Security in real dollars.

How much more?

WW

 

[tharock220]

In "the good old days". FICA exceeded the amount paid out; the excess was "loaned" to the federal government. That's no longer the case. To meet today's requirements SSA has had to cash in those bonds; when they're depleted SS becomes a cash in/cash out business. SSA announced the other day that will happen some time in 2034.

In your opinion should the SSA have followed the example of sovereign wealth funds around the world(I know Social Security technically isn't one) and made investment in something other than US treasuries?

 

[ncguy]

If you have a mortgage or rent to pay, then it's not time to retire.



Indeed. The surpluses were poorly invest. I think you'd agree.



Nope. But actions speak louder than words.



That would definitely suck. I'm happy my company, Shell, has made changes to its pension plan to reflect the changing workforce. Such actions aren't quite so hindered by politics in the private sector.



See above.

You ever felt the satisfaction of paying a car off? Imagine what that will feel like when you send your last mortgage payment. I haven't seen had the privilege yet.

I have a mortgage... At 2.75 percent
And money earning 4 percent
The bank is paying me in retirement

 

[tharock220]

I have a mortgage... At 2.75 percent
And money earning 4 percent
The bank is paying me in retirement

Imagine how much more you'd be getting paid if your mortgage payment was earning 4% as well.

 

[WorldWatcher]

If you have a mortgage or rent to pay, then it's not time to retire.

Sure it is. My mortgage P&I is under $500 a month. I couldn't rent for that.

(Technically we could have paid the house off during COVID and had no mortgage. Refinanced the balance at 2.7% for 30 years. We are of the opinion that having some debt is good to keep the credit score as high as it is.)

WW

 

[ncguy]

Imagine how much more you'd be getting paid if your mortgage payment was earning 4% as well.

Well if I paid off my mortgage I would be worse off, correct?

 

[WorldWatcher]

Well if I paid off my mortgage I would be worse off, correct?

It's weird.

Let's say you have $100,000 in mortgage, simplified, at 2.7% that's $2,700 per year that you are paying in interest (not counting principal). If you have $100,000 in the bank earning 4% that's $4,000 a year. So it looks like you have $1,300 left over.

However if you factor in inflation, the amount extra you are making is eaten up by the loss of earning power if the inflation rate exceeds 1.7%.

WW

 

[ncguy]

It's weird.

Let's say you have $100,000 in mortgage, simplified, at 2.7% that's $2,700 per year that you are paying in interest (not counting principal). If you have $100,000 in the bank earning 4% that's $4,000 a year. So it looks like you have $1,300 left over.

However if you factor in inflation, the amount extra you are making is eaten up by the loss of earning power if the inflation rate exceeds 1.7%.

WW

Having 1300 more is better no matter the inflation rate

Additionally the higher inflation the more interest I earn while my mortgage is fixed

 

[Metric Mouse]

The Second Quote is incorrect.

The Income Taxes paid on SS benefits go back to the SSA for payment of current benefits. Removing the Income Tax on SS will accelerate the Trust Fund shortfall because it will reduce current revenue to the SSA.

WW
.
.
.
.

Taxation of benefits

Thank you for the correction. I apologize for spreading information that was untrue. The ignorance was my own, and I appreciate your correction.

 

[ttwtt78640]

If you have a mortgage or rent to pay, then it's not time to retire.

We paid cash for our manufactured (mobile) home (new in 2020), but rent the 1/2 acre lots that it sit’s on (currently for $600/month). Fortunately, our annual property taxes are (currently) under $68, due to homestead and senior exemptions.

Indeed. The surpluses were poorly invest. I think you'd agree.

That’s by law.

Nope. But actions speak louder than words.

Which actions?

That would definitely suck. I'm happy my company, Shell, has made changes to its pension plan to reflect the changing workforce. Such actions aren't quite so hindered by politics in the private sector.

Good for you.

See above.

You ever felt the satisfaction of paying a car off? Imagine what that will feel like when you send your last mortgage payment. I haven't seen had the privilege yet.

Our home, motor vehicle (2002 Chevy Tahoe), (two) work trailers, work equipment and tools are fully paid for. I do owe a little (with a zero interest loan) on my newest lawn mower, but it generally pays for itself (by using it to mow other properties).

 

[WorldWatcher]

Thank you for the correction. I apologize for spreading information that was untrue. The ignorance was my own, and I appreciate your correction.

No problem, we all make mistakes.

Props for the acknowledgement of the mistake.

WW

 

[noonereal]

. Mismanagement, borrowng from he fund, reinvesting that money to use elsewhere isn't proving to be able to keep SSI afloat. The money invested and the interest earned should have to go into the SSI fund and not be spent elsewhere.

Exactly. I paid extra, had benefit cuts, retired later to make the program solid back in 1984. Don't tell me 40 years later you blew my cash and not expect a riot.

 

[tharock220]

Well if I paid off my mortgage I would be worse off, correct?

Given that you have a mortgage now, yes. If you didn't have a mortgage, the money you're putting towards your house every month could be earning you interest, or some other return, as well.

It's weird.

Let's say you have $100,000 in mortgage, simplified, at 2.7% that's $2,700 per year that you are paying in interest (not counting principal). If you have $100,000 in the bank earning 4% that's $4,000 a year. So it looks like you have $1,300 left over.

However if you factor in inflation, the amount extra you are making is eaten up by the loss of earning power if the inflation rate exceeds 1.7%.

WW

This makes no sense. Inflation isn't going to make that delta negative.

 

[WorldWatcher]

This makes no sense. Inflation isn't going to make that delta negative.

I didn't say it made the delta negatived. But if you are paying 2.7% in mortgage and earning 4% in interest, than you are really only making 1.3%.

Not whether you have more or lest money at the end of the year you have to factor inflation. If inflation exceeds 1.3% your buy power for X dollars will have decreased.

WW

 

[Visbek]

Money isn't borrowed from the Trust Fund.

Yes, it is. It's loaned to the rest of the government, at an interest rate that matches inflation. That's why it is referred to as "intragovernmental debt."

You can say all revenue is revenue, but that's not the case by law or the way government accounting sees it.

My point is that there is no necessity whatsoever behind that legal structure. None, nada, zip.

SS is only funded this way to make it more palatable to Americans, many of whom hate the idea of someone receiving a benefit because they need it, rather than because they paid for it.

Corporations, universities, non-profits, etc all have sources of income that can only be used to pay for specific items.

There are actual reasons for such segregation. E.g. a bank shouldn't be allowed to speculate on risky investments using depositor's funds. Or, if a non-profit raises money based on the promise to spend that money on scholarships, it should not be easy for the non-profit to use those funds to buy the CEO a private jet.

Notice how you didn't actually provide a reason for this segregation, other than "it's how the law was written" ? Why do you think the law was written that way? What's wrong with funding SS like any other program?

And governments all over the world invest pension taxes into equities, real estate, and bonds(even government).

That's nice. It's also completely irrelevant to what I'm saying, because that isn't how SS is set up.

Instead Americans were forced to "loan" their money to the general fund then pay the general fund's interest that is owed on their money they loans.

SS was started because, as the Great Depression made clear, private savings and private charity were woefully insufficient to keep seniors out of poverty.

No, it's not a "loan" in any sense of the word. SS is a pay-as-you-go system, and almost no one receives exactly the same amount they put in. SS redistributes taxes paid right now, to beneficiaries right now.

Again, the Trust Fund was just the government taxing you more than it needed, and choosing to keep those taxes rather than refund taxpayers. That's not a "loan," it's over-taxation. I will leave it to you to decide if that is a good or bad thing.

If it sounds stupid, that's because it is.

Using a private defined-contribution plan (like Australia's Super or a 401(k)) has its benefits, but some big issues too -- such as funds overcharging, or holdings dropping during market downturns, or retirees taking out big lump sums right at retirement.

Defined-benefit plans certainly aren't "stupid." In fact, SS has worked great for decades, keeping millions out of poverty, and becoming the most popular government program. That's why politicians, including those who would rather shut down the government than increase spending, routinely refuse to deal with the fake "crisis."

Segregating tax revenues in order to fool people into thinking that SS is a giant IRA program, and then blaming that structure when it creates a fake "crisis," sounds stupid, because it is.

 

[ncguy]

Given that you have a mortgage now, yes. If you didn't have a mortgage, the money you're putting towards your house every month could be earning you interest, or some other return, as well.


This makes no sense. Inflation isn't going to make that delta negative.

but the point being that you said you shouldn't retire if you have a mortgage, but that's a very general claim that isn't particularly proven, my case being an obvious exception to your claim, and no doubt there are others.

 

[tharock220]

I didn't say it made the delta negatived. But if you are paying 2.7% in mortgage and earning 4% in interest, than you are really only making 1.3%.

Not whether you have more or lest money at the end of the year you have to factor inflation. If inflation exceeds 1.3% your buy power for X dollars will have decreased.

WW

Your buying power would decrease with inflation at any positive number.

Yes, it is. It's loaned to the rest of the government, at an interest rate that matches inflation. That's why it is referred to as "intragovernmental debt."

The Trust Fund is the US Treasuries the SSA purchased.

My point is that there is no necessity whatsoever behind that legal structure. None, nada, zip.

Of course there's a reason. Collecting payroll taxes from someone creates an obligation to that person down the road. That's the only reason needed.

That's nice. It's also completely irrelevant to what I'm saying, because that isn't how SS is set up.

It's not irrelevant. Your argument is that payroll taxes should be included with all other government revenue. It's not. It's supposedly put into investments "backed by the full faith and credit of the US government". Why not just call it what it is.

SS was started because, as the Great Depression made clear, private savings and private charity were woefully insufficient to keep seniors out of poverty.

No, it's not a "loan" in any sense of the word. SS is a pay-as-you-go system, and almost no one receives exactly the same amount they put in. SS redistributes taxes paid right now, to beneficiaries right now.

Just what do you think US treasuries are?

Again, the Trust Fund was just the government taxing you more than it needed, and choosing to keep those taxes rather than refund taxpayers. That's not a "loan," it's over-taxation. I will leave it to you to decide if that is a good or bad thing.

None of this has anything to do with what I said.

Using a private defined-contribution plan (like Australia's Super or a 401(k)) has its benefits, but some big issues too -- such as funds overcharging, or holdings dropping during market downturns, or retirees taking out big lump sums right at retirement.

Defined-benefit plans certainly aren't "stupid." In fact, SS has worked great for decades, keeping millions out of poverty, and becoming the most popular government program. That's why politicians, including those who would rather shut down the government than increase spending, routinely refuse to deal with the fake "crisis."

Segregating tax revenues in order to fool people into thinking that SS is a giant IRA program, and then blaming that structure when it creates a fake "crisis," sounds stupid, because it is.

Read above.

Social security has run a deficit for the past five years. There's no more surplus to pillage. Retirees on Social Security won't receive priority over foreign governments who still have money to lend if that choice ever has to be made.

 

[tharock220]

but the point being that you said you shouldn't retire if you have a mortgage, but that's a very general claim that isn't particularly proven, my case being an obvious exception to your claim, and no doubt there are others.

Sure, you're an exception. I was taking issue with your reasoning being faulty.

The typical mortgage isn't under $500 a month. A person making the typical mortgage payment generally shouldn't retire, unless they're retirement income is substantial, which is possible.

 

[Roadvirus]

Not accounting for potential impacts of Trump's tariffs and deportations which may worsen the picture, we're eight years from a 23% cut to benefits.

Social Security’s Finances Erode Further and Could Spell Benefit Cuts

Apparently the invasion of the SSA by Mush & his DOGE turds didn't stop the bleeding like they claimed they would.

 

[ncguy]

Sure, you're an exception. I was taking issue with your reasoning being faulty.

The typical mortgage isn't under $500 a month. A person making the typical mortgage payment generally shouldn't retire, unless they're retirement income is substantial, which is possible.

Your general statement remains unproven, that you shouldn't retire if you have a mortgage

 

[Visbek]

The Trust Fund is the US Treasuries the SSA purchased.

...and again, the idea behind that structure is that the rest of the government borrows, and then repays, the Trust Fund. That's exactly what you are describing.

What do YOU think a T-Bill is...?

Of course there's a reason. Collecting payroll taxes from someone creates an obligation to that person down the road. That's the only reason needed.

LOL

I'm sorry, but that's nonsense. Want proof?

1) Collecting payroll taxes from someone creates an obligation to that person down the road.
2) Collecting income taxes from someone creates an obligation to that person down the road.
3) The law creates an obligation to that person down the road.

Is there any necessity to use 1) over 2) or 3)? Nope.

It's not irrelevant. Your argument is that payroll taxes should be included with all other government revenue. It's not. It's supposedly put into investments "backed by the full faith and credit of the US government". Why not just call it what it is.

I am "calling it what it is." You just don't want to accept the truth.

Yet again... SS is a pay-as-you-go system. The payroll taxes you paid this week go right out the door, right away, as benefits.

Yet again, the Trust Fund is a pile of excess tax revenue. It is not "invested" in anything. SS does not own stocks, or bonds, or real estate, or private loans. The Trust Fund is loaned to the rest of the government, which repays it when those securities expire. In other words, it's a fiction.

Just what do you think US treasuries are?

LOL

Here's your original comment: "Instead Americans were forced to "loan" their money to the general fund then pay the general fund's interest that is owed on their money they loans."

Parsing that word salad is, well, not easy. What I can say is that Americans -- meaning individual citizens -- aren't "loaning" their tax dollars. That's what I tried to correct.

Meanwhile, the SS Trust Fund is loaned to the rest of the government. Do you now accept that as correct, while still denying it? That's just super weird.

None of this has anything to do with what I said.

Yes, it does -- because you seem rather unwilling to accept the reality of what the Trust Fund is, and how it operates.

Social security has run a deficit for the past five years. There's no more surplus to pillage. Retirees on Social Security won't receive priority over foreign governments who still have money to lend if that choice ever has to be made.

I'm sorry, but most of that paragraph is just nonsense.

Yes, SS has run a deficit.

No, the Trust Fund isn't gone yet. It will not be depleted until 2031-2032.

No one "pillaged" anything. Again, the Trust Fund was just surplus taxes raised in previous years, and the whole point of its existence was to fill in any gaps between revenues and outlays. It was DESIGNED to be spent in this way. Every penny it's loaned to the rest of government has been repaid, and all the funds have been meticulous tracked for decades.

Seniors are one the largest and most powerful constituencies in the US. If you think they're going to get stuck with a 23% cut in benefits, I think you're going to be VERY surprised.

 

[Bullseye]

In your opinion should the SSA have followed the example of sovereign wealth funds around the world(I know Social Security technically isn't one) and made investment in something other than US treasuries?

Possibly. Understand, though, that the treasures they buy are special in that their value can never go below par and are not available on the public market.