Social Insecurity


“My wife worked full time from 1958 to 1970 and part time a few years thereafter. She contributed $6,445 toward Social Security according to her government statement, and employers paid another $5,027. In July 2005, she began collecting her monthly retirement benefit. In just nine months she collected the entire amount she contributed to the system. In less than 16 months, she received more than the combined employee/employer contributions. “

We are happy to accept this largess, but is this a system that younger Americans (my four children and grandchildren, for example) can sustain? 

Is there a crisis?  

An article I wrote containing these words first appeared in Employee Benefit News in 2005. Since then my wife’s benefit has increased in each year and she is delighted. Yes, I know lost interest on her contributions and all that so she really put in more, bla, bla bla. It’s quite a deal no matter what.

I am not sure all those middle class “working Americans” are as thrilled to see this wealth transfer. I suspect that if the Social Security tax were a bit lower that many people would rather have the money to spend on a new DVD, iPod download or some other necessity of life. 

While the working poor are funding a Social Security system that pays spouses and ex spouses of the same person a benefit plus a benefit to the worker and increases all the benefits each year, they are no doubt happy to know that Joe Kennedy is out there finding free oil for them from a South American dictator. 

You expect me do do what?
You expect me to do what?

 Ain’t America grand? 

After more than 70 years, American are still relying on Social Security for a major portion and in many cases (about 22%) the sole source of retirement income. Talk about planning ahead for ones retirement. With the disappearance of employer sponsored pension plans and now disappearing employer matching contributions on 401(k) plans we can only imagine what the future will look like.

 Who will be paying for your Social Security benefits?   But there is more good news my wife and all other Social Security beneficiaries received their little piece of the Federal bailout in the form of a cash payment of $250. 

Consider the following from the Social Security website: 

In 1945, the number of covered workers per OASDI beneficiary was 41.9. By 1965, that number was 4.0, and in 2006, it was 3.3. Under intermediate assumptions, the number of covered workers per OASDI beneficiary is estimated to be 3.2 in 2010, 2.2 in 2030, 2.0 in 2060, and 1.9 in 2080. 

Under intermediate assumptions, the combined OASDI trust fund expenses are expected to exceed income from taxes in 2017. By 2027, OASDI expenses are expected to exceed income from taxes plus interest income, and the trust fund is expected to be exhausted by 2041. (And, just for the record the “trust fund” is nothing more than IOUs from the federal government that will have to be paid with tax dollars, unlike with a private pension where there is cash in a trust that can only be used to pay pensions) 

In 2005, Social Security was the largest source of income for those currently age 65 and older, accounting for 40.1 percent of their income on average. Pension and annuities income was 19.3 percent, income from assets 13.6 percent, and income from earnings was 24.8 percent. Nearly all individuals (91.1 percent) age 65 and over were receiving income from Social Security. (Source: EBRI)

 While the current administration is scrambling to find money to pay for universal health care, mostly via an array new taxes, cutting Medicare payments or eliminating the tax advanatges of employer based health care, Social Security and Medicare sink deeper into the abyss.  Don’t you have to wonder how we are going to do it all?

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