Every now and then I get some sort of statement of my benefits from Social Security that says how much I would receive once I retire. Typically, I throw these away and do not pay much attention to them. I am like a lot of folks in my generation who don’t think Social Security will be around by the time I get to retirement. I once read a study where younger folks believed that there is more of a chance in getting abducted by aliens than ever collecting a Social Security (SS) check?
I had a friend who received his statement and noticed an asterisk. When you followed down to the bottom of the page, it mentions the actuaries’ current projections of income and expenses for the program would only generate benefits of 70% of the projected amount as stated above. Well that really is a kick in the rear!
When the program was started in the 1935, there were nearly 13 workers for each retiree. Now we are closer to a ratio of 3 workers for each retiree. That ratio has to be dropping quickly with a combination of the baby boomers starting to retire and a labor force participation rate in free fall and in the low 60% range with over 94 million Americans out of work. That means a lot less people there to pay into the plan.
So statistically, the program can’t work unless you bring in a lot more workers to pay into the system, cut the benefits paid, increase SS taxes, or a combination thereof.
Recently, SS actuaries predict that the program’s “trust fund” won’t be exhausted until 2034. This is a whole year longer than their original estimate. But David Stockman, the former White House Budget Director during the Reagan administration has dug into the numbers and finds other disturbing problems. He wrote, “On a cash basis, the OASDI (retirement and disability) funds spent $859 billion during 2014 but took in only $786 billion of taxes, thereby generating $73 billion of red ink. The trustees’ own reckoning, the OASDI funds will spew a cumulative cash deficit of $1.6 trillion during the 12 years covering 2015-2026. The OASDI trust fund could be empty as soon as 2026.”
Wow, that is another 8 years before the trustees’ estimate that the fund will run dry! The difference is the actuaries’ project nominal GDP grows at a 5.1% annual rate in the next 12 years. Yet we have come anywhere close to half that amount.
Of course for this to run out of money assumes there are funds inside there to begin with. The problem here is Congress began borrowing from the trust fund in the 1980s to pay for many things that are not dealing with retirement. So the trust fund is filled with a bunch of IOUs from the US Government. That is not something to give one any warm fuzzies for anyone who will be relying on SSI funds for part of their retirement.
So at the end of the day, I suppose I will be working as long as possible, relying on my own savings for retirement, and looking forward to meeting E.T. before I collect any SSI. I suppose this is the same approach most folks in my age group have. Unless something different changes, imagine how this can impact your members.