this is a copy and paste that was on aol today about social security. why is no one saying that we need to stop giving it to everyone that shows up whether they have paid into it or not. i know for a fact that the SSI is given to people that show up in this country and have never worked here or paid into the system. WHY?







Social Security Will Run Dry Even Sooner Than the Latest Bad Projection
By Chuck Saletta, The Motley Fool

Posted 6:00AM 09/29/12 Posted under: Retirement


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For the past several years, Social Security's Trustees have been reporting on the accelerating depletion of that program's Trust Fund. As recently as 2008, the Trust Fund's doomsday was projected to be as far away as 2041. But over the past several years that collapse date has inched forward and now sits at 2033.

Unfortunately, even that projection looks like it's a bit too optimistic. It turns out that there's a very real risk that next year's report will move that date even closer.

What Happened?

Since the Trustee's Report was written in April, some news has emerged about the investments in the Trust Fund putting a drag on the returns.

Every year, Social Security rolls over its maturing long-term Treasury bond holdings, picking up new ones to replace the ones that are expiring. Because of exceptionally low interest rates, Social Security is earning less interest on its new bonds than it did on its old ones.

That lower interest, along with the fact that the program now takes in less in taxes than it spends in benefits, means the Trust Fund is on even shakier footing.

What's a Few Billion Among Friends?

Take a look at the scary trend line that shows the annual interest lost when the old long-term bonds matured or were sold versus the annual interest on the new long-term bonds:



Every year since 2010, the new long-term bonds being bought by Social Security pay substantially less interest than the old long-term bonds that are maturing. That red line is getting deeper, and the 2012 total is nearly $5.4 billion in annual interest foregone because the new bonds pay that much less than the old ones.

That amounts to $5.4 billion less available for paying benefits or for reinvestment. That's a $5.4 billion deeper hole the program faces next year than it would have if rates had stayed steady.
And that's just from one year.

So What?

Since 2010, the total annual income foregone due to lower interest rates has exceeded $10.5 billion. Since this only counts the long-term bonds that Social Security is using -- not the short-term certificates that get traded much more frequently -- those numbers add up to create a whole world of pain.

It's a huge deal, because Social Security is already paying out more in benefits than it takes in as taxes. The only reason the Trust Fund is still growing at all is because of the interest it generates on the Treasury bonds it holds.




With interest rates so low and net interest received dropping as a those old bonds mature, that "net interest" kicker is rapidly losing steam. The sooner it runs out of gas, the sooner the Trust Fund starts actively shrinking, starting something of a death spiral as the stockpile depletes.

From the perspective of a potential recipient, this hastens the need for you to prepare for the Trust Fund's collapse. Every downward revision in the year the Trust Fund will expire hurts your chances to get ready in two ways. For one, the closer date gives you that much less time to prepare. For another, if you aren't already preparing, then you've already lost the time that had passed since the last revision.

In other words, assume for the sake of discussion that the 2013 Trustees' Report moves the Trust Fund's anticipated run-dry date a year closer -- to 2032 rather than today's expected 2033. If you did nothing to prepare in 2012 because you had 21 years before the issue struck, imagine waking up when the next report is published to find that you've lost not one year, but two.

What Will You Do About It?

Think it can't happen? Take a look at the table in this article along with the graph above in the one you're reading now. Ask yourself what's more likely: that the ugly trend that has already established itself will continue, or that these very serious issues will somehow, almost magically, solve themselves.

With around two decades left, you still have time to prepare. But your chance to let time and the magic of compounding work for you to cover for Social Security's shortfall is rapidly running out. So get moving now, or prepare for a really scary income gap when you are looking to retire

 

Been doing it for at least 40 years now, so I guess it is a well established American tradition. It would be mean spirited and hateful to stop now.

Besides, we are a rich country, so we can afford it, right?

 

SS should be optional. It should not be deducted from your check against your will. Forced automatic deductions is anti-freedom.

I could easily invest my employees SS withholdings and get them a better return for their retirement.

SS is nothing but a Ponzi scheme.

 

One of my professos was saying last week how bad low interest rates are because of things like this.

 

I got into a similar discussion on another board I used to visit. It got so heated, I actually pulled out my yearly SSA estimate and ran the numbers myself. The type of account I assumed was a general 401(k) type that allowed investment in mutual funds and allowed a limited number of trades per month. Using real world figures and assuming real world average returns, I would have made out much better having a private account. The presumption was half of our SSA would be left with the government and the rest would be my private account. The numbers were incredible. I would have two time the benefit while only investing half of the capital. Absolutely there would have been huge ups and downs. Anybody who knows anything about investing, knows when you are getting close to retirement you need to limit your risk so being all in stocks a year or two before you retire is foolish. By the time you are a couple years out should primarily be in bonds/CDs/cash so your principle doesn't grow as much, but then again it doesn't get wiped out from a bad day in the market.

 

I think your professor is lacking. Low interest rates are bad only because you get a super heated economy. That is the only bad part about low rates. In this economy, it is barely lukewarm so there really isn't a downside to low rates. The lower rates are keeping the economy from completely collapsing. Social Security was set up so it didn't need to rely on any outside funding except the payroll tax. The fact that it can't make it while including the meager interest from US bonds should be deafening, but nobody is listening.

Think about it. What would happen if rates suddenly went to 6% tomorrow? The government would still be borrowing money from SSA and China, they would just be borrowing more. Businesses wouldn't be able to afford the short term loans they use to keep their business open, so they would either have to close their doors or lay a lot of people off (just like the 2008 meltdown and subsequent credit market freeze). There would be less payroll taxes to collect so the trust fund would run out much sooner.

 

there is limited control that the govt has over interest rates and return on investment. but they can stop giving to foreigners that just show up and have never paid a dime into it.

 

I plan on suing for every dime I've spent in and won't be getting back. Class action lawsuit anyone?

 

A lawsuit at the SCOTUS level a while back ruled that the US doesn't have to give you anything. Technically Congress could pass a law getting rid of all aspects of Social Security except the taxes and there is nothing you can do, except go to the streets and riot. Hell with the most recent decisions Congress can tell you what foods to eat, what TV shows to watch, and what products to buy. There literally is no limit to what Congress can do.

 

Assuming the President will sign the bill, or if they have enough votes to override a veto.

 

I would love to have had a 401K holding what I (and my past employers) have paid into SS since I was 15 years old... and the compounded interest it would have earned. That's even considering the ups and downs of the last few years. With my own savings included, I would have already been set for life and able to put the sum into safer investments and retire on the interest. As it is, I may not see a dime of what I've contributed. And if I do it won't amount to much.

 

Same here.

Let's say you average $50,000 per year for your working life. You put in 7.5% and your employer puts in 7.5% of that into social security, an average of $7,500 annually.

To simplify the math, let's jsut say you invest $7,500/year every year for 35 years, from age 25 to 60.

Let's assume you invest at an average of 6%, and let it compound.

You would have $885,906 at retirement. At 6%, that would generate $53,154in income, annually. From age 60 on, you could live off the interest until you die, then pass on the $885,906 to your children.

Under social security, you will work until you are 70 (so you will put in another $75,000), get paid about $24,000/year, and when you die (perhaps the day after you retire), you will not have any of your $885,906 to pass onto your kids.

Lousy deal. There is a reason why when they offered the government employees the 1 time chance to opt out of social security (about 15-20 years ago), all the smart ones did so.

In fairness, Social Securitiy does have some obligations that reduce the returns. Like if I day at age 30 with young kids, my kids and wife will get survivor benefits, even if I did not put in enough to cover that. But all in all, many of us will get very little out compared to what we put in.

 

That must have been local governments. The last time the Feds had the ability not to pay into social security was the mid 80's when their retirement system changed. Now the only federal employees who don't pay social security are those who are still under the old retirement system. They also don't receive any social security for their government time.