Is the Social Security Trust Fund technically broke?
Kerby Anderson: Although politicians talk about the Social Security Trust Fund, the reality is that it is neither. There is no trust and there really is no fund. Each Congress has spent the surpluses that were supposed to be set aside for when the baby boom generation began to retire. Economist Kevin Hassett found something else. The surpluses that once fed into this imaginary trust fund are now gone. Due to the current recession the funds are now negative. Payroll receipts are down because fewer people are working. Essentially, the trust fund has gone into the red about 10 years ahead of schedule.
The latest government numbers confirm this. This year it is estimated that Social Security will take in $654 billion dollars in payroll taxes and pay out $662 billion in benefits and expenses. That is a shortfall of $8 billion dollars. Now the response from the Social Security Administration is even though there is a shortfall, Social Security is not running a deficit. It turns out that the interest the government owes itself for borrowing and spending the surpluses will provide an additional revenue stream. So even though there is a shortfall, Social Security isn’t running a deficit, yet.
While all of this is true, some members of Congress are starting to object to this accounting slide of hand, and all this really does is postpone the inevitable. By the next decade the bulk of baby boomers will have begun their retirements. The only way to have been able to fund the millions of boomer retirees will be to have a real trust fund, not a fictitious one. Each year Congress spent the money in the trust fund, and now recession has removed any last pretense of their being money for future retirees.
I don’t think most Americans really care whether the Social Security Trust Fund is technically broke. They just want to know if their Social Security will be there for them. The reality is that each year more retirees will be drawing on funds that aren’t there. For some reason, no one in the administration will tell you the truth. I just did.
I’m Kerby Anderson and that’s my point of view.
Should I retire at age 62 or 63?
Senior Citizen: If I start my retirement benefits at age 63, is the amount I would get the same as age 62?
Social Security Representative: I like to use this question here because the answer is something that most people should just kind of understand, but sometimes people get pension systems mixed up. Social Security does not have a fixed amount for an individual when they get to be 62.
In fact, with my sister, up in Canada, they have a fixed amount that an individual gets because of being a worker in Canada and then you get something above and beyond that. Well, for workers in the United States, we look at how much you’ve earned and paid into the system to figure out how much you’re going to get.
We send out a benefit statement every year. That’s what people need to do. Pull out their benefit statement, you look to see what your benefit is at age 62, what your benefit would be at age 66, if that’s your full retirement age. Well, for that four years, if your difference is $480 and there are 48 months there, well, then you know that your benefit is going to increase $10 per every month that you wait and hold off retirement from age 62.
So do the math, do look at that benefit statement because that’s the first place that you need to start looking when you start doing some retirement planning and you don’t have to wait until, you know, a date of birth. You don’t have to work until January. Sometimes retirement plans are, you know, personal.
Senior Citizen: Right.
Social Security Representative: You know, maybe October is the right time to go out on retirement for you and you can find all that information on our website to help make those decisions.
Senior Citizen: It’s awfully hard to get along anymore without the access to the Internet, isn’t it?
Social Security Representative: Well, and that’s the thing is that if you’re paying for Internet access and you have it at home, use it.
Senior Citizen: Right.
Social Security Representative: Also, we’ve talked to a lot of individuals where the libraries have got Internet access. We have some tribal council organizations that make Internet access available to their members and so use the access where you have availability, but be, you know, safe. Be sure to come right into our website, socialsecurity.gov.
Senior Citizen: Okay, thank you, Mark.
Privatize Social Security?
Mr. Bob O’Brien: Hi, welcome to myWealth.com. I’m Bob O’Brien. I’m one of the senior instructors with the courses. Welcome to the blog for the day, “Why is it time to privatize Social Security?”
And this has always been a very controversial topic, privatize Social Security, leave it as it is and so forth, and one thing no one can argue about is the Social Security System is in very bad shape and it is in grave danger and these problems that it has have been magnified by the current economic crisis.
Now, if you’re a Social Security recipient, I don’t want you to worry or lose any sleep over it. You know, you’re going to continue to get your payments, but there are projected deficits in the future, and these deficits are getting worse and worse.
So it’s really important that you understand this topic and if you’re in the younger generation, make sure you take our investing course, make sure you take our course, so you’ll know what to do in terms of managing your own money, but also to have an opinion on this subject as well.
Voiceover: Be sure to check out the written blog at www.mywealth.com/blog.
Okay, the current economic crisis has further punished the Social Security System. The Social Security System was not in very good shape prior to 2008, but the economic crisis has made it even worse, simply because the Social Security System is funded through payroll tax, but unemployment as is well know has been on the rise and payrolls are being cut, and therefore, there is less revenue generated via the payroll tax.
Now, Social Security has projected deficits in 10 years, but these deficits have been moved up because of the current economic crisis and the reduced payroll tax money that’s coming in due to lesser payrolls.
So let’s take a look at what the current system currently looks like. Can you pay a payroll tax in order to provide retirement benefits to current retirees with the promise that you will receive your benefits when you’re retired? The government then invests any surpluses into Treasuries, which is used to finance other government spending and so forth, in which the Fed then prints money to buy these Treasuries.
So you can see this is a very fragile system and I posed the question, “Which is more irresponsible, continuing to just print money in order to finance Social Security or taking any surpluses or perhaps in the case of printing money creating any surpluses and investing them in the stock market?” Read more
Online Application for Social Security Retirement Benefits
Senior Citizen: What type of information will I need to complete my online application for retirement benefits?
Social Security Representative: This is a good time with that last question about retirement age because we’re really encouraging individuals to take advantage of the fact that we have improved our computer access that individuals can go to our website, not only plan for retirement for the future, you know, to see what amount they’d have, to see what happens to their amount if they decide to work more or if they work with amounts reduced as they get older.
What you can do is when you get ready for retirement? You can then actually make decisions to do the paperwork right there on the computer. You don’t have to go into an office. You don’t have to talk to somebody on the phone. This whole situation that we’ve done in the past was that we were the guardians of the benefit amount and really we’re the secretaries. We were just typing in the information, helping people get through the process and now we’ve laid the process out for you.
You’ve got your number. You can just go right into Social Security website. You can apply. You can tell us what bank you want the money to go to. You can tell us your information about military service, who you’ve been working for, how you’re going to be retiring, how you’re going to cut back on your amount, so that you’d be eligible if you want early retirement.
We don’t even ask all those same questions if you want your benefit with full retirement, because there is no reduction that you have to do in your work to start your benefit once you get to be of full retirement age. But the best thing for people to do, so that they can make those long-term plans is do the planning and then actually do the application right on the website because it’s your time and it’s your money. Why come into a Social Security office or have to go through all this with us because, you know, if you can ask for a mortgage on the computer and act of getting your retirement.
You know, we’re trying to make it simpler and I’ve got some good news for you in the future. Hopefully this next time we get together, we’ll talk about how our website is going to be much more convenient. We’re going to make it easier to use and it’s right now, it’s been cleaned up a bit so as to make it easier to follow, easier to use things, but we’re going to make the computer programs a little easier to work with.
Senior Citizen: Okay, we’ll see some of our $4 guess.
Social Security Representative: You know, that’s a big thing that I talked to our clients about is that when gas prices go up, people decide to cut back on, you know, extra, miscellaneous travel, and save a trip. That’s the one thing that I recommend to people is that if you can do a lot of these things on our website, why not do it?
Senior Citizen: Right.
Social Security Representative: Do it at home or I will just add a senior fare and every other person I talked to said, “Oh, I don’t have my own computer at home.”
I say, “Well, but you’ve got kids. You’ve got, you know, your daughter or your son and they’ve got a computer at their house. Our computers are open on the weekends.” You can come to our website and do so many things; change your address, get a replacement Medicare card. You can look up the pamphlets and you can print a pamphlet right from our website. So a lot of this is there on our website. You can save the trip. You know, try it. That’s the biggest thing to do. Just try it and see how you like working on our website and it might be convenient that you’re going to enjoy it and continue dealing with us that way.
Senior Citizen: Okay.
Economics Professor: Get the Government out of Social Security
Economics professor and author Robert Higgs gives his insight on Social Security and why the government should not be the one handling it.
Caller: “My wife actually hails from Oklahoma, so it’s interesting to hear that you lived with her. And we live in Central Valley, you know. But I’m curious, I’ve been [...] for 25 years so I will take issue with most of what you say. But I wonder when you say that it’s essentially theft to take from one through taxation to give to another at an individual level, how do you feel about, as another caller asked, about the proper role of government when they tax or essentially steal from everyone to provide for the common good? What do you consider is the proper role of government? And taking your argument the extreme part of Social Security and what not, don’t we essentially have to be willing to let people die in the streets if they do not handle their finances properly, for example, if they opted out of Social Security or what not?”
Robert Higgs: “We need to remember that all the money that goes into Social Security comes from us. And if it comes from us and it were never taken by the government then that would be in our possession for the relief of the destitute. And furthermore, it wouldn’t have been diminished by passing through the bureaucracy to support the Social Security Administration. It’s a leaky bucket whenever we transfer income through government because the transfer personnel themselves eat up resources along the way. In addition, the government doles out the money according to bureaucratic rules (one size fits all type rules), which means that the assistance can never be tailored so that it goes to those who truly are the most deserving and does not go to those who are basically gaming the system at our expense.
So, there is a lot to be said for never taking the money away from people in the first place. And when I say that, I certainly mean to suggest that no, I don’t think people would be dying in the streets if we never had Social Security. Before we had Social Security people were not dying in the streets for want of assistance. It’s true that the society was much poorer but that wasn’t because it lacked Social Security, it was because… if we go back far enough in history we will find that the economy was not as productive as it is now.
So, poverty was almost a necessity given the lack of productivity historically. But there was no lack of people’s assistance in help. I mentioned earlier all the fraternal organizations, thousands and thousands of them existed in this country and other countries before government took over the social insurance systems. There were countless churches, countless neighbors, countless friends, countless relatives. These were sources of assistance to people in need. Furthermore, they were people who knew the persons they were assisting. They could tailor the assistance so that they gave what was most needed when it was most needed. And they gave moral support. What you get now is you deal with a bureaucrat in a welfare office. This is one of the most demeaning experiences anyone can have. You’re forced to go in and beg for your livelihood from somebody whose just holding on to his job watching a clock to go home at 5 o’clock.
It’s far superior to have a system in which the destitute are aided by those who are close to them rather than relying on losing money by filtering it through government middlemen and then relying on one-size-fits-all rules, exploitable rules, corruptible rules, rules subject to the vagaries of politics. Rather than relying on that very imperfect means, people have the capacity to develop through charitable organizations, and to some extent they have anyhow, measures to relive distress and to help people in ways that are really effective and useful, and most of all give people help in a way that if they can be removed from that situation they are removed and not simply made dependent to stay forever on the government dole because it creates a kind of electorate for politicians that support that system.”
Social Security Reform
Raymond Clum, who is running for the Republican Nomination for President of the United States in 2012, has an interesting proposal for Social Security reform.
Raymond Clum: “Hello, my name is Raymond Clum and I approve this message. I’ll spend some time since we’ve been talking about Social Security reform. It’s a pretty dry topic. I hope this will be informative. I hope it will make you think.
Right now the Social Security system has been forecast to start running a deficit in the year 2017. Right now it’s now April 9th, 2009, so we’re talking eight years at which point of time Social Security will start spending more money than it takes in in payroll taxes.
Now, in the 2008 election cycle in the Democratic primaries, Senators John Edwards and Barack Obama both supported eliminating the cap or lifting the cap on payroll taxes, which right now running at about 6.5% of the first $97,500. Beyond that it’s not increased. Now, sulking the rich may be a popular thing to do, but when you raise the cap it just doesn’t hit the super rich. It’s going to hit doctors, it’s going to hit managers in manufacturing companies. It’s going to hit high overtime union workers, it’s going to hit engineers, it’s going to hit attorneys. Well, that wouldn’t be a bad thing.
Anyway, I digress. 16% of the workforce involves sales and office occupations. Some of these are going to be teachers, smart businesses are going to be hammered. It’s estimated that $136 billion in economic growth will be lost if the cap is raised or eliminated over the next 10 years. And as many as 1.1 million jobs gone. Now, for all of the pain that that’s going to cause, it’s only going to extend the life of Social Security from 2017 to 2025, another 8 years.
Read more
Real Estate Investors Pay No Social Security and Medicare Taxes?
“Now, what about Social Security and Medicare taxes? Well, my friends, we don’t pay those either, ever. Why? Because those are ignorance taxes. You see, what do I mean by ignorance taxes? You have to pay to be ignorant enough to have a job to pay earned or to pay ignorance taxes. Social Security and Medicare are taxes that were derived by the US government because it realizes the people were ignorant enough to believe that if they can work for the rest of their lives and ignorant enough to believe that they are going to have health insurance the rest of their lives, not realizing that someday along the way, like with everybody as you get older, there are people out there that are younger, they are better educated, they are more motivated, they work for less money, and they are going to take your job.
And when that happens, when you’re pushed out of your job at some elderly age, you’re going to realize for the first time that you have no passive strings of income and you’re going to be in trouble.
You’re also going to find out that your insurance policy is getting away and that’s going to be a problem because now, it’s hard for you to get insurance as an older person, especially unemployed, let alone the thought of paying for it.
So, my friends, they created something called ignorance taxes, which is this social safety net for people to fall on when they become old and unable to work and unable to obtain insurance. We call this Social Security and Medicare.
Now, why do they not tax real estate investors? Because they realized that if you’re smart enough to figure out how to make passive strings of income that you don’t have to work for, that you’ll never lose a job that you don’t have, and that the income you earn is going to continue to come whether or not you’re old or young and so you’re going to be able to afford to buy health insurance and not have to cancel your health insurance policy when you lose your job. Read more
Social Security Retirement Planning
“I’m just curious. How many people think we should delay Social Security as long as possible? A few folks. You’ve seen my talk before? How many think to take it as early as possible. A few folks. Okay.
And actually, the answer… there is not a single answer here. It is a personal decision like we heard earlier from Nick. But I just want to give you some insights into this. First of all, this is a chart which just shows the monthly benefits and this is just an example. We are looking at someone who is earning $75,000 in 2009 and had always been making this amount. This is for a single person and if you’re married, if both of you work, each of you will get a benefit that comes from these kinds of charts and then your household income is just the sum of the two.
If one of you didn’t work or works sporadically then there is a special spouse’s benefit, which I will get to in a second. But just look at this chart. Say you are born in 1950, if you retire at 62, the monthly benefit is $1,470. If you retire at 65 its $1,850. And this person their full retirement as Nick was talking earlier is 66 and so their monthly benefit would be $1,980. And finally if you wait till age 70 the monthly benefit is $2,660. So you can see that there is a pretty dramatic increase in the amount of your monthly benefit if you delay your retirement benefits.
This is the same chart but for a married worker where the spouse didn’t work, and this is just a sum of the workers benefit and the special spouses benefit. But it’s the same pattern, you know, if you delay your benefits then your benefits go up. And so I like this chart. You know, when you put up charts that show percent increases it’s hard to relate to a percent, but here monthly income we can relate to a dollar amount of monthly income. It makes it easier for us to decide what’s the right thing to do. Read more
Social Security Stimulus Check – Frequently Asked Questions 2/2
Will the Social Security stimulus check count as gross income for federal income tax purposes?
No, it will not.
What must I do to receive my Social Security stimulus payment?
No action is necessary. The Social Security Administration has all the information they need to get your payment to you.
Will I receive a stimulus check if I have a delinquent federal debt?
It depends. The Treasury Department will offset the checks to collect delinquent child support and debts owed to state and federal agencies. On the other hand, the one-time payment will not be used to collect Social Security or SSI benefit overpayments.
If I don’t receive my Social Security stimulus check payment by the first week of June, what should I do?
After June 4, 2009, you may contact your local Social Security office or call their toll-free number, 1-800-772-1213 to tell them your payment has not arrived. Please wait until then to ask about your payment because earlier calls may slow down the service.
Will the one-time Social Security stimulus check change the amount or delivery date of my regular Social Security or SSI benefit?
No, the one-time payment will have NO effect on your regular Social Security or SSI benefit. The SSA will deliver the one-time payment separately from your regular benefit.
Will the $250 stimulus check count as income for SSI?
No, it will not.
If I have a representative payee, who will receive my Social Security stimulus check?
If you have a representative payee, the SSA will deliver your one-time payment to your representative payee. Your representative payee is required by law to use the payment for your benefit.
Will the stimulus payment count as a resource for SSI?
The payment will not count as a resource in the month you receive it or the following 9 months. For example, if you receive the one-time payment in May 2009, it would not count as a resource from May 2009 through February 2010. If you still have this money after February 2010, it will be counted as a resource starting in March 2010.
If I receive Social Security or SSI and also get Veterans or Railroad Retirement benefits, who decides whether I get an economic recovery payment?
If you receive benefits from Social Security and Veterans or Railroad Retirement benefits, Social Security will determine if you are entitled to the payment. Remember, you will receive only one payment regardless of how many different benefits you currently receive.
Stimulus Checks for Children
Are children who receive Social Security benefits eligible for the one-time Social Security stimulus check?
No, children under the age of 18 (19 if still in high school) who receive Social Security benefits are NOT eligible for stimulus check. However, disabled adult children will receive a payment.
Are children who receive SSI benefits eligible for the one-time Social Security stimulus check?
Yes, disabled children receiving SSI are eligible for the one-time stimulus payment.
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