Imagine this scenario..you work for fifty years, faithfully paying your taxes and dreaming of that day when you can retire because you have faith that the system will take care of you. You start planning your financial budget with all of the retirement income that you will have coming in. You faithfully waited until 67 to retire so you could take full advantage of the social security that you receive. Your first social security check comes in the mail and suddenly it is only 75% of the benefits that you were suppose to get. What the hell?
Retirement is an important part of ones life and we should look forward to it without worrying about financial issues. The Social Security program was something that was a good idea because at the time there were many elderly people during the Great Depression that were poor. It has become so much more than Social Security adding disability, Medicaid and unemployment later on.
The Social Security system is our largest social program and it is used by advocates of other social programs as to how the government is able to provide for their people. A lot of the annual budget goes to social security and yet people continue to say we are going to have problems in the future. People want more money to put into the program despite an almost three trillion dollar surplus. So why are they asking for more money?
The reason why is that as with most programs, the planning was done to try to impress constituents versus actually making the program something that is good for the present and the future.
First of all, Social Security is a tax, it is not a savings account or anything even close to it. It is not like a 401K or a pension where you made a choice to put money into something. It is a tax that both the employee and employer have to pay in order to keep it liquid, it has nothing to do with having a choice. With it being a tax, it can be reversed at anytime without anyone saying they have to give the money back. So if some group of legislators say one day they want to stop Social Security, they can. That is why when Donald Trump passed a plan to temporarily stop payroll taxes to give people some relief, the haters immediately complained making it seem like he was attacking social security. Besides having the right to do it, what they didn't say is that people would have to still pay that money back. The haters didn't care about the people on social security, they were covering up what is blatantly the weakness of social security.
Social Security is not an entitlement despite when people love to say it is. An entitlement means you have a right to something but as previously communicated the government can change the law at anytime therefore taking this away. Even the Supreme Court has said this is not an entitlement and the paper statement received for social security has printed the laws can change.
Supreme Country on Social Security
So what makes up the weakness of Social Security, one that showed the original plan was not as thought out as it could have been. The plan was to pay the retirement payments for today's elderly with payroll deductions that come from people that are working today. So for those that think the amounts taken out of your paycheck is going into some fund that you are guaranteed to get when you retire, think again. For those that say what I paid while working is what I am getting when I retire. Think again. You will be dependent on the people working at the time you retire to pay for your Social Security.
To update those that hear all of the grumblings about the future of social security. Estimates say the 3 trillion dollar excess will be gone by the year 2035, that doesn't mean it will run out of money. It means that the amount of benefits will be less because the amount of money coming in to make the payments will be less. So people will not get 100% of their money that they thought they would. Again, bad planning on the side of the government.
A Ponzi scheme is defined as a fraudulent investing scam which generates returns for early investors with money taken from future investors. How does that not sound like Social Security? We are giving money to the elderly today with funds taken from working people who will retire in the future. So we have to depend on working people to make sure our social security program has enough money to pay out. Unemployment benefits do not charge social security taxes. Illegal immigrants do not pay social security taxes unless they have a social security number and even then they do not get benefits.
So the fact that the government controls Social Security, they also control when people are able to get those benefits. That is an additional knife in the gut of American's. The government tells us when we have to retire in order to get our full benefits, not only for social security but for any kind of retirement. If you choose to retire at 62 you only get a portion of the benefits you were told you would get and in the future that might even be less than it is now. If one waits five more years, then one will get maybe 100% or in the future less. For 401K, they tell you that you have to be 59 1/2, where did they come up with that number. If you decide to retire early and take that money out, you may endure a penalty. So anyone that wants to retire on their time may not get any money so the government wins again.
There are other holes in the plan that is Social Security. There didn't seem to be a plan for population increases in the United States. In 1935, the population was 127 million people (over 300+ years) and since that time we have increased in population by 200 million plus (over 85 years). Other than a cost of living increase and some modest payroll tax increases, Social Security fell way behind. How was this not taken into consideration?
Another hole is a change in the the job market effecting Social Security. When jobs decrease, the amount of money being given to Social Security is also going to decrease while the amount being paid out will continue or go up. What changes were put in place when technology has removed jobs from the market and therefore less money going into the fund. The same with outsourcing, no jobs, no money.
It's greatest weakness has shown no brighter than the current Covid crisis. The number of unemployed people increased and so the amount of money being paid into Social Security has decreased tremendously and eventually will need to make up the money. The most ironic thing is that the government is responsible for putting many of these people out of work and therefore the reason the money is not going into Social Security. Why would one ever make something dependent on other people working to fund it, of course that is how the entire government works. No working or low wages means less taxes. Hmmm...could that be the reason for all of the advocating of more jobs and more wages?
Even the original issue, solving elderly poverty, is still not totally fixed. Even though one gets more than they put in (if getting 100%) they still get a lot less than what they were making. Depending on where one lives, social security is not enough to live on. Then if people try to offset with another job, they can only earn a certain amount otherwise they will have to pay taxes. Taxes on the taxes.
A part of bad planning for Social Security that we do not even talk about is something that has a lot of different rumors about it. Social Security has its own governmental trust fund (a fund is where the money is stored) and is not used for anything else, which the general fund is. However, because it is a tax, the government as it does with most of our other taxes, uses the money received to buy Treasury bonds. The government has to pay the money back with interest which is one of the ways the plan increases. However, that interest is one of the largest expenses the federal government pays each year. So basically, it helps one fund but shorts another. If the fund has no surplus then it means the government has less money to use from the fund. Less money means less programs and a hard time making interest payments.
So how will the government get the program in line? There really isn't a lot of things they can do that do not potentially hurt some tax payer. One is increasing the payroll tax which is currently 6.2% for social security (both employee and employer) and 1.45% for Medicare. Who knows what they would have to increase it by to make it work but it would take more money out of people's pocket. One thing going around is increasing the minimum amount of wages that are subject to taxes (which increases based on cost of living), currently at $142,800. It has been said to increase from anywhere between $250,000 and $400,000. Every $10,000 takes out $620 for social security so increasing the limit on wages takes money out of people's pocket which means they have to adjust their livelihood. Raising the retirement age, adjust the benefits formula and/or changing the cost of living formula are some other ways, all of which hurts the working people.
Social programs are essential for the people to live a decent life in their country. However, these social programs are really only beneficial if they do not hurt others in the operating of them and if they are planned well. So we have to ask ourselves if we do have social programs, is the government the right ones to run these programs. We have to push back on the people making the decisions that take our money and do not use it wisely. Otherwise, that day we open the check from the government it will not be enough for us to retire the way we want, it will continue to be the way the government wants.
