Archive for the ‘Social Security’ Category
If you want to frighten Baby Boomers, just show them the list of statistics in this article. The United States is headed for a retirement crisis of unprecedented magnitude, and we are woefully unprepared for it. At this point, more than 10,000 Baby Boomers are reaching the age of 65 every single day, and this will continue to happen for almost the next 20 years. The number of senior citizens in America is projected to more than double during the first half of this century, and some absolutely enormous financial promises have been made to them. So will we be able to keep those promises to the hordes of American workers that are rapidly approaching retirement? Of course not. State and local governments are facing trillions in unfunded pension liabilities. Medicare is facing a 38 trillion dollar shortfall over the next 75 years. The Social Security system is facing a 134 trillion dollar shortfall over the next 75 years. Meanwhile, nearly half of all American workers have less than $10,000 saved for retirement. The truth is that I was being incredibly kind when I said earlier that we are “woefully unprepared” for what is coming. The biggest retirement crisis in history is rapidly approaching, and a lot of the promises that were made to the Baby Boomers are going to get broken.
The following are 35 incredibly shocking statistics that will scare just about any Baby Boomer…
1. Right now, there are somewhere around 40 million senior citizens in the United States. By 2050 that number is projected to skyrocket to 89 million.
2. According to one recent poll, 25 percent of all Americans in the 46 to 64-year-old age bracket have no retirement savings at all.
3. 26 percent of all Americans in the 46 to 64-year-old age bracket have no personal savings whatsoever.
4. One survey that covered all American workers found that 46 percentof them have less than $10,000 saved for retirement.
5. According to a survey conducted by the Employee Benefit Research Institute, “60 percent of American workers said the total value of their savings and investments is less than $25,000″.
6. A Pew Research survey found that half of all Baby Boomers say that their household financial situations have deteriorated over the past year.
7. 67 percent of all American workers believe that they “are a little or a lot behind schedule on saving for retirement”.
8. Today, one out of every six elderly Americans lives below the federal poverty line.
9. More elderly Americans than ever are finding that they must continue working once they reach their retirement years. Between 1985 and 2010, the percentage of Americans in the 65 to 69-year-old age bracket that were still working increased from 18 percent to 32 percent.
10. Back in 1991, half of all American workers planned to retire before they reached the age of 65. Today, that number has declined to 23 percent.
11. According to one recent survey, 70 percent of all American workers expect to continue working once they are “retired”.
12. According to a poll conducted by AARP, 40 percent of all Baby Boomers plan to work “until they drop”.
13. A poll conducted by CESI Debt Solutions found that 56 percent of American retirees still had outstanding debts when they retired.
14. Elderly Americans tend to carry much higher balances on their credit cards than younger Americans do. The following is from a recent CNBC article…
New research from the AARP also shows that those ages 50 and over are carrying higher balances on their credit cards — $8,278 in 2012 compared to $6,258 for the under-50 population.
15. A study by a law professor at the University of Michigan found that Americans that are 55 years of age or older now account for 20 percentof all bankruptcies in the United States. Back in 2001, they only accounted for 12 percent of all bankruptcies.
16. Between 1991 and 2007 the number of Americans between the ages of 65 and 74 that filed for bankruptcy rose by a staggering 178 percent.
17. What is causing most of these bankruptcies among the elderly? The number one cause is medical bills. According to a report published in The American Journal of Medicine, medical bills are a major factor in more than 60 percent of the personal bankruptcies in the United States. Of those bankruptcies that were caused by medical bills, approximately 75 percent of them involved individuals that actually did have health insurance.
18. In 1945, there were 42 workers for every retiree receiving Social Security benefits. Today, that number has fallen to 2.5 workers, and if you eliminate all government workers, that leaves only 1.6 private sector workers for every retiree receiving Social Security benefits.
19. Millions of elderly Americans these days are finding it very difficult to survive on just a Social Security check. The truth is that most Social Security checks simply are not that large. The following comes directly from the Social Security Administration website…
The average monthly Social Security benefit for a retired worker was about $1,230 at the beginning of 2012. This amount changes monthly based upon the total amount of all benefits paid and the total number of people receiving benefits.
Could you live on about 300 dollars a week?
20. Social Security benefits are not going to stretch as far in future years. The following is from an article on the AARP website…
Social Security benefits won’t go as far, either. In 2002, benefits replaced 39 percent of the average retirees salary, and that will decline to 28 percent in 2030, when the youngest boomers reach full retirement age, according to the Center for Retirement Research at Boston College.
22. Overall, the Social Security system is facing a 134 trillion dollar shortfall over the next 75 years.
25. Today, only 10 percent of private companies in the U.S. provide guaranteed lifelong pensions for their employees.
26. Verizon’s pension plan is underfunded by 3.4 billion dollars.
27. In California, the Orange County Employees Retirement System is estimated to have a 10 billion dollar unfunded pension liability.
28. The state of Illinois has accumulated unfunded pension liabilities of more than 77 billion dollars.
29. Pension consultant Girard Miller told California’s Little Hoover Commission that state and local government bodies in the state of California have 325 billion dollars in combined unfunded pension liabilities.
30. According to Northwestern University Professor John Rauh, the latest estimate of the total amount of unfunded pension and healthcare obligations for retirees that state and local governments across the United States have accumulated is 4.4 trillion dollars.
31. In 2010, 28 percent of all American workers with a 401(k) had taken money out of it at some point.
32. Back in 2004, American workers were taking about 30 billion dollars in early withdrawals out of their 401(k) accounts every single year. Right now, American workers are pulling about 70 billion dollars in early withdrawals out of their 401(k) accounts every single year.
33. Today, 49 percent of all American workers are not covered by an employment-based pension plan at all.
34. According to a recent survey conducted by Americans for Secure Retirement, 88 percent of all Americans are worried about “maintaining a comfortable standard of living in retirement”.
35. A study conducted by Boston College’s Center for Retirement Research found that American workers are $6.6 trillion short of what they need to retire comfortably.
So what is the solution? Well, one influential organization of business executives says that the solution is to make Americans wait longer for retirement. The following is from a recent CBS News article…
An influential group of business CEOs is pushing a plan to gradually increase the full retirement age to 70 for both Social Security and Medicare and to partially privatize the health insurance program for older Americans.
The Business Roundtable’s plan would protect those 55 and older from cuts but younger workers would face significant changes. The plan unveiled Wednesday would result in smaller annual benefit increases for all Social Security recipients. Initial benefits for wealthy retirees would also be smaller.
But considering the fact that there aren’t nearly enough jobs for all Americans already, perhaps that is not such a great idea. If we expect Americans to work longer, then we are going to need our economy to start producing a lot more good jobs than it is producing right now.
Of course the status quo is not going to work either. There is no way that we are going to be able to meet the financial obligations that are coming due.
The federal government, our state governments and our local governments are already drowning in debt and we are already spending far more money than we bring in each year. How in the world are we going to make ends meet as our obligations to retirees absolutely skyrocket in the years ahead?
That is something to think about.
So what do you think? Do you believe that there is a solution to our retirement crisis? Do you think that we can actually keep all of the promises that we have made to the Baby Boomers? Please feel free to post a comment with your thoughts below…
With Spanish 10Y yields hovering at a ‘relatively’ healthy 5%, having been driven inexorably lower on the promise of ECB assistance at some time in the future, the market has become increasingly unsure of just who it is that keeps bidding for this stuff. Well, wonder no longer. As the WSJ notes,Spain has been quietly tapping the country’s richest piggy bank, the Social Security Reserve Fund, as a buyer of last resort for Spanish government bonds - with at least 90% of the €65 billion ($85.7 billion) fund has been invested in increasingly risky Spanish debt. Of course, this is nothing new, the US (and the Irish) have been using quasi-government entities to fund themselves in a mutually-destructive circle-jerk for years – the only difference being there are other buyers in the Treasury market, whereas in Spain the marginal buyer is critical to support the sinking ship. The Spanish defend the use of pension funds to buy bonds as sustainable as long as it can issue bonds – and yet the only way it can actually get the bonds off in the public markets is through using the pension fund assets. The pensioners sum it up perfectly “We are very worried about this, we just don’t know who’s going to pay for the pensions of those who are younger now,” or those who are older we would add.
Spain has been quietly tapping the country’s richest piggy bank, the Social Security Reserve Fund, as a buyer of last resort for Spanish government bonds, raising questions about the fund’s role as guarantor of future pension payouts.
Now the scarcely noticed borrowing spree, carried out amid a prolonged economic crisis, is about to end, because there is little left to take. At least 90% of the €65 billion ($85.7 billion) fund has been invested in increasingly risky Spanish debt, according to official figures, and the government has begun withdrawing cash for emergency payments.
Although the trend has drawn little public attention or controversy, it has become a matter of concern for the relatively few independent financial analysts who study the fund, which is used to guarantee future payments of pensions.
In addition, there are worries that Social Security reserves for paying future pensioners are running out much quicker than expected.
In November, the government withdrew €4 billion from the reserve fund to pay pensions, the second time in history it had withdrawn cash. The first time was in September, when it took €3 billion to cover unspecified treasury needs.
Together, the emergency withdrawals surpassed the legal annual limit, so the government temporarily raised the cap.
“We are very worried about this,” says Dolores San Martín, president of the largest association of pensioners in Asturias, a small region that has one of the highest percentages of retirees in Spain. “We just don’t know who’s going to pay for the pensions of those who are younger now.”
After the crisis began, some of those countries began using the pension reserves for other contingencies, such covering a drop in foreign demand for their government bonds.Since the collapse of Ireland’s property boom, for example, most of its pension fund has been used to buy shares of nationalized banks and real estate for which no foreign buyers could be found.
“Most of the [Spanish] fund is an accounting trick,” said Javier Díaz-Giménez, an economics professor in Spain’s IESE business school. “The government is lending money to another branch of government.”
Spanish officials defend the heavy investment of the Social Security Reserve Fund in their government’s high-risk bonds. They say the practice is sustainable as long as Spain can continue borrowing in financial markets, and they predict the economy will start to recover late in 2013, easing the debt crisis.
“With foreign investors staying away from the Spanish debt market, you’re going to need all the support you can get from domestic players,” said Rubén Segura-Cayuela, an economist with Bank of America-Merrill Lynch.
Spain’s commercial banks already have increased their Spanish government-bond portfolio by a factor of six since the start of the crisis in 2008, and now own one-third of government bonds in circulation.
The percentage of Spanish government debt held by the Social Security Reserve Fund stood at 55% in 2008, according to official figures; by the end of 2011 it had risen to 90%. Analysts say the percentage has continued to rise, even as international agencies have lowered Spain’s credit ratings.
Spain’s continued use of those reserves to buy its own bonds appears to violate a rule set by government decree that mandates their investment only in securities “of high credit quality and a significant degree of liquidity.”
But with unemployment now above 25% of the workforce and fewer wage earners paying in, the Social Security System is about €3 billion in deficit, according to government estimates.
And in other news, and completing the picture, if not the circle jerk, is news from Libremercado that according to the Spanish Confederantion of Employer Organizations, some 60% of the Spanish companies are now losing money. Via Google translate:
The President of the Spanish Confederation of Employer Organizations (CEOE) has estimated that “60 percent of the companies are in losses. Thing is that entrepreneurs are more thoughtful and went outside.”
Joan Rosell responds well after being asked if he receives “Spanish citizens too negative” in an interview with the newspaper La Razon, who heads a special titled “2013, the recovery begins,” and says that “social unrest is evident and business world is no exception. ”
The president of the CEOE has considered that the private sector “has already made ?? All the restructuring that had to do and the decline in employment in the private sector has virtually stopped. Now is the restructuring of the public sector.”
After defining the first year of Mariano Rajoy in government as a year of shock, Rosell has considered that the Spanish economy remains “superfluous fat by many sides.’s Central government, regional and local. Avoid duplication. We are a country hiperregulado “.
It is not exactly clear why google translate had a problem with that last word…
The following is making the rounds on Facebook:
My reply, which incidentally is all easily-verified, was thus:
No you didn’t.
You were conned.
You paid a tax, nothing more.
This has been ruled on by the US Supreme Court.
That is the same Supreme Court that liberals believe has the right to ban guns (any or all), starting with the NFA and onward through Miller and more.
It is the same US Supreme Court that the liberals say was correct in endorsing Obamacare.
The problem is that the US Supreme Court ITSELF is a con; in Marbury .v. Madison they ARROGATED the right to change the Constitution to themselves, but no such power was ever delegated to them IN the Constitution or by Amendment thereof.
All of those acts by the US Supreme Court are thus unlawful, and those that impugn fundamental liberty interests are openly seditious.
But…. you believe in that court, so go take the issue up with them, SINCE THEY HAVE RULED YOUR SO-CALLED “PAYMENTS” NOTHING MORE THAN A TAX.
You can’t have this one both ways folks…..
The actual liabilities of the federal government—including Social Security, Medicare, and federal employees’ future retirement benefits—already exceed $86.8 trillion, or 550% of GDP. For the year ending Dec. 31, 2011, the annual accrued expense of Medicare and Social Security was $7 trillion. Nothing like that figure is used in calculating the deficit. In reality, the reported budget deficit is less than one-fifth of the more accurate figure.
Did you get that?
The entire economy is $15 trillion.
The accrued expense of Medicare and Social Security alone — and most of it is Medicare — is half the economy each and every year. Put that in your head and consider that this would mean that just to keep even we would have to more than triple the existing amount of tax collected, raising total taxation to more than 60% of the economy!
If you have read Leverage you know that one of the pieces that I pound on hard is the medical cost explosion. I’ve also written about it extensively here in these pages. This is why — it is simply impossible for the promises made through Medicare to be kept. That is not conjecture, it is not able to be fixed with taxation, it is not a matter of opinion.
It is mathematical fact.
You’re not going to get Medicare, unless (1) you’re getting it now and (2) you’re reasonably close to death. For everyone else what you have been promised and what you’re going to get are very different, and there is exactly nothing you can do about it.
There is also no “gradual” way to deal with it.
It never ceases to amaze me how people get “column inches” in a paper like the NYT peddling nonsense like this gent is doing. Oh wait; it’s not that hard to figure out – the media is not about reporting or even opinion, it’s about shaping opinion — and the truth, even arithmetic, be damned.
WE have two political parties in America, runs a saying that conservatives like to quote. One is stupid, the other is evil. And when they join forces to do something that’s both stupid and evil — well, that’s what we call “bipartisanship.”
The payroll tax holiday that passed Congress in the winter of 2010 was a rare exception to this pessimistic rule. Cutting the payroll tax was good short-term politics for both Democrats and Republicans: it was a tax cut that liberals hoped would double as stimulus, and a boost to the middle class that conservatives could support without embracing new federal spending. But more important, it opened the door to what would be good long-term policy as well — because more than almost any feature of the American tax code, the payroll tax deserves to be pared away into extinction.
Ross goes on to do what so many other so-called “populist” commentators do — he conflates the two components of the payroll tax and then talks about getting rid of one of them.
That’s intentionally dishonest and Ross knows it.
The Payroll Tax has two components, both of which are intentionally designed so that you, the employee, only “see” half of them. Both halves, however, come directly out of your wages even though employers are forbidden by federal law to itemize the second half (the “employer contribution”) and show it to you on a pay stub as a deduction off what you would otherwise be paid.
Social Security has a number of very serious and I would argue intentional design features that are both racist and sexist. For example, a black man is expected to live to be 70.8 years, while a white woman is expected to live to 81.2 years. If we presume an equal retirement age of 65 (which the Social Security system does for equal benefits, assuming equal earnings history) the black man will collect benefits for 5.8 years, while the white woman will collect them for 16.2 years, or 279% of the black man’s Social Security payments. Note that a large percentage of the difference is found in things that kill black men before they reach 65; those people get exactly nothing.
All paid in, however, the exact same amount of money.
That’s racist and sexist — and intentional. Those who pay in and get nothing wind up being the net “suckers”; they have no choice but to pay, but they get zero since their payments do not have their name on them – they’re just a tax.
In addition Social Security is “progressive” in that the amount of benefit you get from further contributions once you reach the minimum requirement is less, on a ratable basis, than what you paid in. That is, the lower-income person gets a larger benefit in proportion to their paid-in capital than the higher-income does. Further, the FICA cap and payout cap means that beyond a certain level of contribution, which is reasonably modest and occurs in the middle class income band, you get nothing further at all. Of course you pay nothing more either, so that, I suppose, is “fair.”
Nonetheless Social Security is fixable without a lot of drama, although we certainly should talk about whether the program should exist at all, or whether it should exist in its present form. The reality is that the payroll tax has become a convenient slush fund from which the government steals, and which causes the reported deficit to be smaller than it really is. It was responsible for Clinton’s so-called “Surplus”, which in fact never happened — he simply stole the amounts paid in from the payroll tax that were not immediately disbursed as benefits! Every President since Ronald Reagan has done the same.
To fix Social Security removing the payroll tax abatement is required, as is indexing the full benefit retirement age to longevity. If we want to fix the sexist and racist elements as well, we could index the retirement age by race and gender; this would work because the persons with the lower life expectancy would also pay in for fewer years and likely would have lower benefits, but they would last for the same average amount of time as does someone who is of a longer-lived race and/or gender. This could be adjusted on a five-year sliding scale to account for changes in demographics.
The real problem with the payroll tax is found in Medicare. The Federal Government went from spending $53 billion on all medical services in 1980 to about $850 billion last year. The average retiree gets between three and five dollars out from every dollar they “contributed” during their working years. To put this in perspective the payroll tax is 3.8% for Medicare (both halves) and if we look at the average working wage of about $50,054 (all workers, all races, US Census Bureau) then the payroll tax for Medicare is $1,902 annually (both halves.) Over a 45 year working life this amounts to $85,592.34.
How long does this amount of money last?
The fact is that the average expense that Medicare puts forward for a given retiree is close to $300,000!
There is simply no way to make the books balance given these facts; to make the books balance either benefits must be cut by more than two thirds or the 3.8% Medicare tax must more than triple.
This has been hidden intentionally from the public debate on entitlements because both Democrats and Republicans know what the figures say, and they also know there are only three choices when it comes to solving this problem:
- Triple the Medicare tax to approximately 12%, 6% each for employer and employee with no earnings cap. Incidentally, this is only the forwardcomponent for retirement; you still have medical costs during your working years, insured or not!
- Dramatically curtail Medicare benefits — by a literal 2/3rds or more. That’s not going to be popular, but it’s what is inevitably coming if we don’t solve this, because the law does not permit Medicare to go into negative balances, and by the end of the decade it will.
- Break the medical industry’s monopoly-style pricing and controls. Up and down the line, from drugs to devices to “CON” laws and more. In short, make the entire industry from insurance to providers to hospitals to doctors accountable under Sherman, Clayton, Robinson-Patman and first-sale doctrines, along with removing all shields that prevent them from being attacked under Racketeering and similar statutes for any element of price-fixing or other anti-competitive behavior. This would cause prices to collapse by 75% or more, and suddenly the problem goes away.
#3 is the only way that can work in the long term. But #3 causes an instant deep recession or worse, as the short-term impact of removing that spending from GDP will be immense. It also destroys the political power of these companies and groups, such as the AMA and the insurance industry.
What you’re seeing in editorials like the one cited above, along with the so-called “debate” in Washington (and what drove Obamacare) is the inherent scam and fraud in the system as it has been designed and implemented. Whether FDR intended Social Security to be racist and sexist at its inception is not material to the debate, but the factual outcome as it exists today most-certainly is!
Yet nobody — not Democrat, Republican or even the so-called “Libertarian” party, all of which espouse equality under the law for all persons, will take these issues on and bring them to the forefront of public and political discussion.
Instead what we get is the Three-Card Monte game run by columnists in the NYT, along with the political class, seeking to divert us from the facts and figures that are right under our noses.
The U.S. fiscal gap, calculated (by us) using the Congressional Budget Office’s realistic long-term budget forecast — the Alternative Fiscal Scenario — is now $222 trillion. Last year, it was $211 trillion. The $11 trillion difference — this year’s true federal deficit — is 10 times larger than the official deficit and roughly as large as the entire stock of official debt in public hands.
We of course are not really talking about this. Oh we do talk about the $1 trillion+, more or less, that we add to the “official debt”, but nowhere is mentioned the growth in the actual liabilities — if, that is, you accept that things like Medicare are actual obligations.
Hint: They’re not.
When fully retired, 78 million baby boomers will collect, on average, more than 85 percent of per-capita gross domestic product ($40,000 in today’s dollars) in Social Security, Medicare and Medicaid benefits. Each passing year brings these outlays one year closer, which raises their present value.
No they won’t. Not because they won’t try to, but because the working people of the nation won’t pay it. If pressed that hard they will do what all people do when pressed hard enough — they will revolt, violently if necessary. The reason why is obvious and inescapable; nobody submits to being a slave voluntarily and communism doesn’t work as the quality and quantity of work drops as you try to put your boot on the people’s neck.
Ask young people about this – will you give up everything you earn and have so your Dear Old Dad can live in the way to which he is “entitled”, including all the medical care he wants despite being 300lbs and eating like a pig for the last 30 years?
Compassion? Sure, especially for their own parents. But forcible extraction of literally every bit of value in the labor that working people have so that the “old farts” can sit in their ass and collect that to which they’re “entitled”?
Not a prayer in Hell.
That’s a problem.
The answer for the U.S. isn’t pretty. Closing the gap using taxes requires an immediate and permanent 64 percent increase in all federal taxes. Alternatively, the U.S. needs to cut, immediately and permanently, all federal purchases and transfer payments, including Social Security and Medicare benefits, by 40 percent. Or it can mix these terrible fiscal medicines with honey, namely radical fiscal reforms that make the economy much fairer and far stronger. What the government can’t do is pay its bills by spending more and taxing less. America’s children, whose futures are being rapidly destroyed, are smart enough to tell us this.
Actually, if we don’t cut this crap out they’re going to tell us with guns, pitchforks and torches — or simply by refusing to work at all.
This is the problem with confiscatory tax rates — they drive behavior. People say that “very few” people ever paid the 90% tax rates of years past. That’s true. Nobody made that much, on purpose.
You could set the tax rate over $250,000 at 100% if you wanted to. There are two problems with such a move — first, doing so wouldn’t close the deficit (there aren’t enough people who make over $250,000 and enough income to steal doing this to reach budget balance) but more importantly if you did this the next year nobody would make more than $249,999 since they would get to keep none of it!
What would that do to our economy? Good question; a lot of people would spend a lot of time at the beach instead of innovating and creating, I suspect. And while this might be good for the makers of rum and various other libations, I doubt very much the net economic effect would be positive.
As I noted yesterday (and, I might note, forms one of the key items in Leverage, available to the right) there are interconnected items in our national debate that nobody wants to talk about as interconnected items. Yet we have to, because they form the basis of the fiscal challenges we face.
Policy decisions were intentionally taken that, on any objective basis, amount to massive frauds against the public. A tiny minority of people — banksters — have benefited tremendously from these frauds. The expansion of the credit bubble over the last 30 years has made a tiny percentage of the population fabulously “wealthy” but the wealth they obtained was false prosperity in the first instance. It appeared to be “freely earned and/or given” but it was not; it was stolen as the premise under which it was tendered wasknowingly false and the beneficiaries are the ones who constructed the knowingly-false edifice under which they obtained it.
When you get down to brass tacks it all comes down to the reality of two exponential functions. They always run away from one another. It cannot be otherwise; this is a basic principle of arithmetic, and no amount of arm-waving can or ever will change it.
That’s the bottom line right there. Any two growth functions, where one has a larger growth figure than the other, will run away from one another. Growth in debt, irrespective of the name you give it (e.g. “entitlements”, whatever) may never exceed the growth in the economy.
If it does the above happens. It will not happen some of the time, it will not happen only if you get unlucky, it will not happen only on Tuesdays, it will happen each and every time, without fail, and it will screw you each and every time without fail. It must therefore never be allowed to happen.
This is what all fiscal policy debates are ultimately about. It has never and will never be about anything else. It can’t be about anything else, because this is the reality of that fiscal debate, whether people wish to deal with and admit it or not.
We’re still arguing over stupid things, more than 30 years after the alleged debate began.
Until we address and conform our debate to the above simple mathematical relationship no progress will be made, and the longer we wait to do so the higher the odds that an all-on fiscal and economic collapse becomes inevitable.