I've known I can't really rely on Social Security to exist when I retire, in any notable form, but man, this is so dark. And it's just a start.
(Edit: I'm not certain either way! But it seems like too great a risk to rely on. And the prognosis seems not great! I have heard for decades needs serious help, and nothing seems to change. More broadly, with a few exceptions, I've seen overwhelmingly obstructionism and destruction of America in lifetime.)
Yes, and the sky may fall tomorrow. The longer I live the more I read these sensationalist headlines designed to gin up angst and antagonize people's peace of mind.
Social Security's solvency has been the subject of much debate, but clearer heads point toward a graduation of the current system to include higher earners. That will accommodate the large aging population's demand. Case closed, easy peasy lemon squeezy.
Can someone explain the legal structures in place in the US that make Social Security "run out"? Because it just sounds like deliberate indirection put in place by the government to cut funding for pensions?
In Australia, we have a universal, means-tested pension funded through consolidated revenue (i.e taxes). The pension can't "run out", because it is just a law that says that the government will pay you $X after you turn a particular age, if your assets are below a threshold. But if X were too high the Government would need to raise taxes, borrow money or print money to fund it, like all government spending.
Separately, we have superannuation - which I think is similar to 401k except compulsory for employers to pay 12% of your salary into, which are personal retirement savings held in trust to be released at your retirement, but generally these are account-based and in addition to the pension if you are eligible (i.e what you put in is what you get out).
There are older "defined benefits" superannuation funds where payouts aren't account-based (I think based on years of service in government roles or something like that) but they have been phased out to avoid the moral hazard of something government-adjacent having pension liabilities they cannot meet with their member's funds.
So what exactly is Social Security if it can run out? It sounds like a defined-benefits fund that is run by the government - in which case why has nobody closed it off to new members like Australia did when the writing was on the wall?
I wish i could just opt out of social security and invest the money myself. I'd pay the long term cap gains tax if this was an option, and I'd come out way ahead. The federal government can only mishandle money.
Maybe we need two systems:
1. You may move to be a certified responsible saver. You inherit all risk. But you opt out of the taxes. You must prove retirements assets are being contributed to.
2. Mandatory saving for everyone else (reading other countries, seems like this happens elsewhere). Money is pooled and invested into US companies. Investments must produce at least 8% return annually over 10 year rolling period or something, else corporate assets are forfeited (someone more saavy than I needs to figure that policy out).
Imagine my surprise when I realized just a few months ago that I was now old enough to apply for social security.
Younger, blue-collar-raised me thought I should hold out on applying for social security until I was 70 so as to get the largest monthly payout.
Older, hopefully-wiser me (who has since learned about investing) applied for social security immediately and will stash the disbursements into an index fund until I actually need them.
(I'm oversimplifying because there are other factors to consider, but generally, historic returns on the stock market suggest you'll have more by age 70 by investing he disbursements when you're 62 than social security would have paid out if you had waited until 70.)
(Wild to imagine a system that was put in place that requires the recipient to guess how long they think they're going to live and choose when to start payments. Some kind of personal prediction market of one…)
The wife was on board my starting at age 62 simply because of talk of social security solvency issues like the headline.
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[ 0.20 ms ] story [ 20.9 ms ] thread(Edit: I'm not certain either way! But it seems like too great a risk to rely on. And the prognosis seems not great! I have heard for decades needs serious help, and nothing seems to change. More broadly, with a few exceptions, I've seen overwhelmingly obstructionism and destruction of America in lifetime.)
Social Security's solvency has been the subject of much debate, but clearer heads point toward a graduation of the current system to include higher earners. That will accommodate the large aging population's demand. Case closed, easy peasy lemon squeezy.
Ok
In Australia, we have a universal, means-tested pension funded through consolidated revenue (i.e taxes). The pension can't "run out", because it is just a law that says that the government will pay you $X after you turn a particular age, if your assets are below a threshold. But if X were too high the Government would need to raise taxes, borrow money or print money to fund it, like all government spending.
Separately, we have superannuation - which I think is similar to 401k except compulsory for employers to pay 12% of your salary into, which are personal retirement savings held in trust to be released at your retirement, but generally these are account-based and in addition to the pension if you are eligible (i.e what you put in is what you get out).
There are older "defined benefits" superannuation funds where payouts aren't account-based (I think based on years of service in government roles or something like that) but they have been phased out to avoid the moral hazard of something government-adjacent having pension liabilities they cannot meet with their member's funds.
So what exactly is Social Security if it can run out? It sounds like a defined-benefits fund that is run by the government - in which case why has nobody closed it off to new members like Australia did when the writing was on the wall?
Maybe we need two systems:
1. You may move to be a certified responsible saver. You inherit all risk. But you opt out of the taxes. You must prove retirements assets are being contributed to.
2. Mandatory saving for everyone else (reading other countries, seems like this happens elsewhere). Money is pooled and invested into US companies. Investments must produce at least 8% return annually over 10 year rolling period or something, else corporate assets are forfeited (someone more saavy than I needs to figure that policy out).
Younger, blue-collar-raised me thought I should hold out on applying for social security until I was 70 so as to get the largest monthly payout.
Older, hopefully-wiser me (who has since learned about investing) applied for social security immediately and will stash the disbursements into an index fund until I actually need them.
(I'm oversimplifying because there are other factors to consider, but generally, historic returns on the stock market suggest you'll have more by age 70 by investing he disbursements when you're 62 than social security would have paid out if you had waited until 70.)
(Wild to imagine a system that was put in place that requires the recipient to guess how long they think they're going to live and choose when to start payments. Some kind of personal prediction market of one…)
The wife was on board my starting at age 62 simply because of talk of social security solvency issues like the headline.