Home > Social Security > Social Security..where’s the money?

Social Security..where’s the money?

It seems like many people believe social security (SS) is in big trouble.

Let me allay your fears, its not. (at least in the near term)

Financially, SS should be solvent for a long time. For at least the next 30 years SS has enough funds in its (old age and survivor etc etc) trust fund to pay what it is projected to pay out. The problem comes in how the trust fund is invested.

The trust is kept in US Government bonds. That’s fine as long as the federal government can afford to repay those bonds, when needed, to make up for revenue shortfalls. If the federal government doesn’t get spending under control something is going to give. Either the government will have to default or sell bonds to pay off the bonds held by the SS trust.

Here’s your problem, the faith and credit of the US Government isn’t accepted at the supermarket, they only take money.

In the long term either benefit cuts or a tax increase will be needed to off set for the large number of persons collecting and the smaller number of those paying in. It’s not undo-able, just unpleasant. An alternative is allowing people to pay their taxes into private accounts which could, in theory, have a higher rate of return than treasury bonds.

More on this in the future.

(if there are any inaccuracies, let me know. I’m happy to tell you why your wrong or correct myself if it’s me.)

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Categories: Social Security
  1. Justin
    2010/12/10 at 09:03

    This is the advantage that proponents of social programs have – once someone is on a system of welfare, you can easily demonize anyone who suggests that we cut benefits or attempt to wean people off the system, no matter how defunct the system is.

  2. 2010/12/11 at 00:08

    Worse is the tangle that needs to be undone to accommodate the weaning.

    How many people plan their retirement around social security? Not their entire income necessarily, but a portion they must have to make ends meet and not eat cat food, or the cat.

    What do you do? You need income coming into SS to pay current beneficiaries (once the trust runs out IF it can be paid back) and any taxation to provide that income reduces what people could put aside to make up for the loss of the program itself!!

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