Social Security Surplus... Huh?

After having gone round and round (and round) with people for many years now, about the veracity, logic, sustainability, and morality of social programs. An article that I just came across, in an unrelated AP article, about issues with Medicare, contained a snippet, about social security, which has literally dropped my jaw...

By comparison, Social Security taxes and expected benefits come closer to balancing out.

The same hypothetical couple retiring in 2011 will have paid $614,000 in Social Security taxes, and can expect to collect $555,000 in benefits. They will have paid about 10 percent more into the system than they're likely to get back.

Source Article

Wait a minute... Aren't we all told, endlessly, that the baby boomers collecting their Social Security is what is going to bankrupt the nation? Aren't we constantly pounded by allegations that it is a pyramid scheme that does not actually finance itself on an individuals basis? Isn't the party line that the whole program is borrowing from tomorrow to pay for today?

I keep rereading this snippet and I remain utterly puzzled. If Social Security is actually making a 10% profit from this example couple, statistically modeled as follows:

Consider an average-wage, two-earner couple together earning $89,000 a year. Upon retiring in 2011...

... which puts this couple LITERALLY at the median of American wage earners for a two check income... then I am truly having issues understanding how this program is not viable, or at least a LOT closer to viable than we are constantly told.

Am I the only person who feels that this does not seem to add up? That something here smells a bit funny?

Maybe ATS's economic minds can come along and help sort this seeming disparity out.

~Heff

Still seems like a bad investment.

You give them 614K and they return $555K?

If you just put 614K in a sock drawer wouldn't you have 614K later?

reply to post by In nothing we trust


I don't mind, personally, paying extra to help support the people who are unable to care for themselves. I know many right wing folks take great umbrage to this concept. But, in reality, social responsibility is part of being in a society.

My issue with what I have read here is that it appears a program which we are told hemorrhages money, is not actually doing so. So I am left to wonder... Have we been lied to about how sustainable social security really is? Is the information in this article spin? Is any of it true at all?

I've always taken for granted that my Social Security would be dried up by the time I got old enough to collect... and now I am really confused about the reality of it all.

~Heff

The article assessment of SSI is complete BS! There is no SS Trust fund. The money is in the general fund supposedly earmarked for SSI but that is just a ruse since they are running a 14 trillion deficit. The money is borrowed and your income taxes and SSI taxes go to pay the interest on the debt borrowed to pay all this. It is complete fiscal insanity. It is a giant credit card. Except now no one is lending us anymore money i.e. buying our bonds cause they know they are worthless so the Federal Reserve is buying them to keep the scheme going a little longer but can't last as it inflates the economy and devalues the dollar and that will end soon as all other countries are quietly unloading dollars as quickly as possible before the rush.

Even if it actually worked like the lies they feed the public we have 3 retired folks collecting for every I person working and paying in and that is going up as more people lose thier jobs. Bottom line; your screwed all the way around. Most people believe it won't happen but the dollar is on its death bed with terminal cancer, IT WILL HAPPEN and it is not far off. There will be no SS soon believe it!

Here is the thing: You don't get back what you pay in, the money you pay in today is going to retirees today, and when you retire the workers of that time will be paying your monthly SS check. So when the baby boom retires there will be many retirees compared to few wage earners who pay. If you paid your SS money into an interest bearing account throughout your working life, you would retire a millionaire. But instead, you pay it to the government so you can expect a poverty level stipend when you retire.
If people are told this they generally do nothing so maybe the best way to teach them how to avoid getting shafted is to shaft them until they learn. It's the Thomas Jefferson thing: If we put up with that kind of crap, we deserve the result.

Originally posted by RedPill

You don't get back what you pay in, the money you pay in today is going to retirees today, and when you retire the workers of that time will be paying your monthly SS check.

So when the baby boom retires there will be many retirees compared to few wage earners who pay.

Two things need to happen then.

They need to convince the younger generation to have more sex and have more babies and/or we need to invade and occupy Central America and Canada so that we can seize their resources and get thier people to pay into our system.

Well I will not knock SS - every single elderly person in my family was able to survive BECAUSE of that money.

I know if I do not advance in my life ( I intend to advance of course ) but if I did not, I would not be able to
stop working until I dropped dead.

I also think people should be free to opt out of any government program if they decide to do so... Such a thing would reduce disagrement and it would be plain fair.

Heff, I did not read the article, just wanted to point out one HUGE glaring problem with any discussion on SS.

When you pay in $1 today and you get paid back $1 in the future 1-40 years later (would have to do a running limit to show the math, not going there) that money is exponentially less valuable due to inflation, or in the case of the SS beneficiary, deflated value.

Not to mention all the other problems which the main one is this-

They have spent the money in the general fund, even if they take those IOU's and convert them directly to SS checks or US dollars, they directly cause inflation, which then just makes things spiral.

Over the last two years, the SS system has gone into the red. More is going out then coming in. So, we have the latest SS tax drop, with no correlary drop in outlays. What does this do? Increases the debt, which increases the borrowing, which increases the inflation.

Welcome to the Wiemar Republic.

Got a wheelbarrow to go buy a loaf of bread with those dollars, or-

Got gold?

The SS System would have worked if there actually was a fund behind it like there was supposed to be.

It is just a simple transfer system,where those who work pay for those who are retired.

Any excess funds have been skimmed off every year by your corrupt and wasteful politicians to fight your fake corporate wars and provide many with a lifestyle they do not deserve.

reply to post by Hefficide


Social Security was never meant to be a long term pension plan and as long as we treat it that way we won't be able to fix it. That is the problem. Comparatively, social security can be saved with minimal changes, including, but not limited to, raising the retirement age. Social Security is reporting more cash going in because they are cashing those non-transferable treasury bonds issued during the Clinton admin in exchange for robbing the "trust fund". But they're getting devalued dollars in return.

Heff, I thought those numbers seemed a little off, so I did some checking. Turns out they are way off, unless my math is flawed (A great possibility).

If that couple had been earning $89,000 throughout a say 40 year career (extremely unlikely) and they had been paying at the current 6.2% SS tax rate (not the true rate for the entire 40 yer period), they would have only contributed $220,000. Not the $614,000 the article claims.

In order for them to have contributed the $614,000, they would have been taxed at a rate of 17.25% of the $89,000 over the entire 40 year period.

However, the $555,000 SS benefit appears pretty accurate, as it amounts to about $22,000 annually over a 25 year retirement (age 65 to 90). So, the numbers should be nearer $220,000 paid in and $555,000 taken out.

reply to post by WTFover


If I'm not mistaken....That sounds like the makings of DEFICITS...Not surpluses...



Any system pay out more than it is taking in will collapse eventually. Unemployment is a big driver of deficits at this point.

reply to post by WTFover


Thanks WTFover!

I have been trying to make sense of this, off and on, all night. Admittedly, not with all diligence. But, still, I did look around a bit. And I think some of the disparity actually might be caused by the fact that, according to the Social Security Benefit Calculator one can actually opt to estimate their benefits in "future (inflated) dollars".

Economics have never been my strong suite, but the whole concept here seems shaky to me.

~Heff

Thought I would take this a step further, although it is beyond the scope of the OP.

(Again, I am using the unlikely assumption that their income was steady over 40 years, like the original article indicates)

Were that couple allowed to invest their money in a reasonably secure interest bearing instrument, at $5,500 annually or $458 monthly, over the 40 year period they would have accumulated $1.1 million, assuming a 6.5% rate of return. So, their income would be double that provided by SS.

To me, this speaks to the great potential for improving the quality of life of seniors, by privatizing SS. I know this is a little simplistic, but when it comes to financial matters, simple is as good as it gets for me.

Originally posted by WTFover

So, the numbers should be nearer $220,000 paid in and $555,000 taken out.

So how does that work?

You would need 2 workers paying in to the system to support 1 retiree.

Isn't the older population living longer and yet we are having less babies?

And on top of that the retirees want us to pay for medicare and yet we (The ones who pay into the system) have no health coverage.

Somthing fishy goin' on.

reply to post by WTFover


Your numbers are a little off with a bit of an omission. The number would have to reflect the employer contribution (matching percentage). I'm also fairly certain that the employee contribution plus the employer contribution adds up to 15%.

reply to post by croweboy


You may well be right and thanks for pointing out my omission. I will look in to it further, when I have more time. Thanks.

Originally posted by croweboy

The number would have to reflect the employer contribution (matching percentage). I'm also fairly certain that the employee contribution plus the employer contribution adds up to 15%.

Isn't the employer contribution voluntary?

It could be worse - in Hungary and Bulgaria they've started a new program where they require retirees to turn-over the contents of their bank accounts or be cut-off from the Old Age Pension (the equivalent of social security).

Hungary's raised $14 billion this way to shore-up their flagging treasury:

www.csmonitor.com...