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2014 Social Security Trustees Report

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JoeTheEconomist

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The Trustees have released their report the summary is found here : News, the full report is found here : The 2014 OASDI Trustees Report

The focus continues to be on the length of the fuse ("The projected point at which the combined trust fund reserves will become depleted, if Congress does not act before then, comes in 2033") rather than the size of the bomb which is found on .... page 192. The unfunded obligation grew to $24.9 trillion in present value. Or in Trustee speak : " If the assumptions, methods, and starting values had not changed, moving the valuation date forward by 1 year would have increased the unfunded obligation by about $0.9 trillion, to $24.0 trillion. The net effects of changes in assumptions, methods, law, and starting values increased the infinite horizon unfunded obligation by an additional $0.9 trillion, to $24.9 trillion in present value."

The highlights : the system's shortfall grew by more than the system collected SOLELY because of the change in year.

Today more than 50% of the public expects to retire after the Trust Fund is exhausted.

Someone retiring today at normal retirement age has a longer life expectancy than Social Security expects to pay scheduled benefits.
 
JoeTheEconomist said:
The Trustees have released their report the summary is found here : News, the full report is found here : The 2014 OASDI Trustees Report

The focus continues to be on the length of the fuse ("The projected point at which the combined trust fund reserves will become depleted, if Congress does not act before then, comes in 2033") rather than the size of the bomb which is found on .... page 192. The unfunded obligation grew to $24.9 trillion in present value. Or in Trustee speak : " If the assumptions, methods, and starting values had not changed, moving the valuation date forward by 1 year would have increased the unfunded obligation by about $0.9 trillion, to $24.0 trillion. The net effects of changes in assumptions, methods, law, and starting values increased the infinite horizon unfunded obligation by an additional $0.9 trillion, to $24.9 trillion in present value."

The highlights : the system's shortfall grew by more than the system collected SOLELY because of the change in year.

Today more than 50% of the public expects to retire after the Trust Fund is exhausted.

Someone retiring today at normal retirement age has a longer life expectancy than Social Security expects to pay scheduled benefits.
Click to expand...

Geezus. I won't even be able to look at my kids without guilt. Horrible.
 
And no one in Washington has any interest in fixing it. SS is the third rail in US elections.
 
tres borrachos said:
Geezus. I won't even be able to look at my kids without guilt. Horrible.
Click to expand...

I hope that you will not look at your kids with anger if they tell you to take a hike.

This is from USAToday : "These debt levels will be driven by the benefit programs that account for more than three-fifths of federal spending. The annual trustees' reports on Social Security and Medicare, released Monday, shows spending on those two programs continuing to soar as Baby Boomers retire."

The fact is that Social Security will not change the debt level unless..... people come to the view that the Trust Fund assets are worthless IOUs which your generation put into the Trust Fund while running up the debt on our generation. So if someone cuts your benefits they will look at you without any guilt at all.
 
azgreg said:
And no one in Washington has any interest in fixing it. SS is the third rail in US elections.
Click to expand...

I have an article on the demographics of the third rail coming out soon. They are disintegrating. 5 years ago, a near majority of voting aged Americans expected to die before the Trust Fund was exhausted. They could not care less about what happened to Social Security. Now nearly 60% of the public expects to retire after the Trust Fund is gone. The third rail is running out of track.
 
JoeTheEconomist said:
I hope that you will not look at your kids with anger if they tell you to take a hike.

This is from USAToday : "These debt levels will be driven by the benefit programs that account for more than three-fifths of federal spending. The annual trustees' reports on Social Security and Medicare, released Monday, shows spending on those two programs continuing to soar as Baby Boomers retire."

The fact is that Social Security will not change the debt level unless..... people come to the view that the Trust Fund assets are worthless IOUs which your generation put into the Trust Fund while running up the debt on our generation. So if someone cuts your benefits they will look at you without any guilt at all.
Click to expand...

I would never tell my kids to take a hike, regardless of what they say to me.

I don't care if someone cuts my benefits. As I posted here recently, I've already calculated my payments (assuming the numbers they send me periodically are right) and know that I will get back my entire investment in too quick a time. I've also been smart enough my entire adult life to save my own money and not pretend I will live on SS benefits when my husband & I are no longer working.
 
JoeTheEconomist said:
I have an article on the demographics of the third rail coming out soon. They are disintegrating. 5 years ago, a near majority of voting aged Americans expected to die before the Trust Fund was exhausted. They could not care less about what happened to Social Security. Now nearly 60% of the public expects to retire after the Trust Fund is gone. The third rail is running out of track.
Click to expand...

I hope you're right, but at the moment I don't share your optimism.
 
JoeTheEconomist said:
The Trustees have released their report the summary is found here : News, the full report is found here : The 2014 OASDI Trustees Report

The focus continues to be on the length of the fuse ("The projected point at which the combined trust fund reserves will become depleted, if Congress does not act before then, comes in 2033") rather than the size of the bomb which is found on .... page 192. The unfunded obligation grew to $24.9 trillion in present value. Or in Trustee speak : " If the assumptions, methods, and starting values had not changed, moving the valuation date forward by 1 year would have increased the unfunded obligation by about $0.9 trillion, to $24.0 trillion. The net effects of changes in assumptions, methods, law, and starting values increased the infinite horizon unfunded obligation by an additional $0.9 trillion, to $24.9 trillion in present value."

The highlights : the system's shortfall grew by more than the system collected SOLELY because of the change in year.

Today more than 50% of the public expects to retire after the Trust Fund is exhausted.

Someone retiring today at normal retirement age has a longer life expectancy than Social Security expects to pay scheduled benefits.
Click to expand...

I can only repeat it every time I read this: We have known this was coming since the 1970's. It was made worse, when the reserves were used to fight the bubbles. In principal the thing is a Ponzi Scheme and will pop, when the number of employees falls as Baby-boomers retire. You don't need to be a nuclear physicist for this.

Oh, I forgot. Every year we delay fixing the thing, the worse it will get. That is one reason bringing those kids at the boarder in and educating them would be a good idea.
 
tres borrachos said:
Geezus. I won't even be able to look at my kids without guilt. Horrible.
Click to expand...

We paid for their education didn't we? Or you did, if you sent them to private schools.
 
azgreg said:
I hope you're right, but at the moment I don't share your optimism.
Click to expand...

I do not see data in terms of optimism and pessimism. The numbers are radically changing. Optimism and pessimism deal with people's response to it. The real question becomes when do 50 and 60 year-olds wake to the fact that they will be alive and well in the crisis. They are not paying attention now, and I think that feeds your view of the data.
 
JoeTheEconomist said:
I do not see data in terms of optimism and pessimism. The numbers are radically changing. Optimism and pessimism deal with people's response to it. The real question becomes when do 50 and 60 year-olds wake to the fact that they will be alive and well in the crisis. They are not paying attention now, and I think that feeds your view of the data.
Click to expand...

My thoughts come from the idea that politicians are more interested in votes than governing. I'm one of those 50 year olds you are talking about and since I see what's happening I have taken my retirement into my own hands. I will not need my SS benefits to get by. If they are there than nice, but I'm not counting on it.
 
So we have nearly 20 years to raise taxes/cut benefits before benefits get automatically cut to a smaller amount?

I guess I'm not really that alarmed.
 
Slyfox696 said:
So we have nearly 20 years to raise taxes/cut benefits before benefits get automatically cut to a smaller amount?

I guess I'm not really that alarmed.
Click to expand...

You will be, when you look at the basic statistics and review the track record of government doing that type of cutting.
 
joG said:
You will be, when you look at the basic statistics and review the track record of government doing that type of cutting.
Click to expand...
Nonsense. If the Trust Fund were to run out in 2033, we could still pay over 75% of the benefits under current law. Hell, it was only in the last few years (when the economy turned bad) when the Trust Fund actually began paying out, after decades of taking in more than was spent on benefits.

We have 20 years to raise SS taxes to the point where we again take in as much as we take out. Like I said, I'm not really that alarmed.

Source: http://fas.org/sgp/crs/misc/RL33514.pdf
 
JoeTheEconomist said:
The Trustees have released their report the summary is found here : News, the full report is found here : The 2014 OASDI Trustees Report

The focus continues to be on the length of the fuse ("The projected point at which the combined trust fund reserves will become depleted, if Congress does not act before then, comes in 2033") rather than the size of the bomb which is found on .... page 192. The unfunded obligation grew to $24.9 trillion in present value. Or in Trustee speak : " If the assumptions, methods, and starting values had not changed, moving the valuation date forward by 1 year would have increased the unfunded obligation by about $0.9 trillion, to $24.0 trillion. The net effects of changes in assumptions, methods, law, and starting values increased the infinite horizon unfunded obligation by an additional $0.9 trillion, to $24.9 trillion in present value."

The highlights : the system's shortfall grew by more than the system collected SOLELY because of the change in year.

Today more than 50% of the public expects to retire after the Trust Fund is exhausted.

Someone retiring today at normal retirement age has a longer life expectancy than Social Security expects to pay scheduled benefits.
Click to expand...

There was another part of the report which should have been even more concerning. The disability part of social security will be broke in two years. What has happened in the past is that congress reshuffles the deck to put more funding into disabilities and less into the retirement fund.

This thing will never go broke, as there will be a fix when things get desperate. Perhaps one fix would be how this long term asset is invested. No retirement fund would be 100% in government treasuries, the lowest return going. Fix that you go a long way to fixing the funding problem.
 
Slyfox696 said:
Nonsense. If the Trust Fund were to run out in 2033, we could still pay over 75% of the benefits under current law. Hell, it was only in the last few years (when the economy turned bad) when the Trust Fund actually began paying out, after decades of taking in more than was spent on benefits.

We have 20 years to raise SS taxes to the point where we again take in as much as we take out. Like I said, I'm not really that alarmed.

Source: http://fas.org/sgp/crs/misc/RL33514.pdf
Click to expand...

Do the math and we can talk again. I admit that I looked at the German and British systems in detail and only cursorily at the US, but the dynamics are very similar. Only the US is a bit better off than Germany, because birthrates kept up longer. The Brits were best off, because they had large reserves, though, I do not know what the bubbles did.
20 year might sound like a lot to someone that is not into investment strategy and national accounts. But believe me. It is not.
 
Slyfox696 said:
Nonsense. If the Trust Fund were to run out in 2033, we could still pay over 75% of the benefits under current law. Hell, it was only in the last few years (when the economy turned bad) when the Trust Fund actually began paying out, after decades of taking in more than was spent on benefits.

We have 20 years to raise SS taxes to the point where we again take in as much as we take out. Like I said, I'm not really that alarmed.

Source: http://fas.org/sgp/crs/misc/RL33514.pdf
Click to expand...

Right, and before a single retiree misses a check the appropriate measures will be made.

Think about what the political disaster there would be to those in power at the time.


David Cay Johnston:

With the coming bulge in retirees, Social Security will start to pay out more than it takes in 2021, according to projections in the latest annual report. Under current law the program would be able to pay only about three-quarters of promised benefits starting in 2033. But that scenario can easily be avoided through a combination of four policy changes that would ensure full benefits continue to be paid, though I fear Congress will continue to do nothing.

One would be restoring the Reagan standard that 90 percent of wages are covered by the Social Security tax, which now applies to only 83 percent of wages. If we went back to the Reagan standard, the Social Security tax would apply to close to $200,000 of wages this year instead of $110,100.

Two would be raising the Social Security tax rate by two percentage points. That tax hike could be smaller or even avoided if, three, we reignited the growth in wages. Median wages have fallen in 2010 back to the level of 1999. And, four, it would help just as much if we created millions more jobs, which since 2000 have grown at only a fifth the rate of population increases.

Social Security is not going broke | David Cay Johnston
 
joG said:
Do the math and we can talk again.
Click to expand...
Um, what math? I gave you the math. What math are you talking about?
I admit that I looked at the German and British systems in detail and only cursorily at the US
Click to expand...
So why would I look at the math, if you admit you're not sure what the math is?

20 year might sound like a lot to someone that is not into investment strategy and national accounts. But believe me. It is not.
Click to expand...
20 years is plenty of time when you understand how Social Security works. Congress could pass a law tomorrow which would make the Trust Fund solvent for the next ~75 years, which shows you how little of a problem this truly is, as long as Congress does their job. And since Social Security is a pay as you go system, there really isn't much of a danger for the next 15+ years.
 
washunut said:
There was another part of the report which should have been even more concerning. The disability part of social security will be broke in two years. What has happened in the past is that congress reshuffles the deck to put more funding into disabilities and less into the retirement fund.

This thing will never go broke, as there will be a fix when things get desperate. Perhaps one fix would be how this long term asset is invested. No retirement fund would be 100% in government treasuries, the lowest return going. Fix that you go a long way to fixing the funding problem.
Click to expand...

The 2033 date is the combined Trust Funds. It assumes that the retirement fund will be bled for the disability side. The system has 2.8 trillion to invest and unfunded liabilities of 24 trillion. That is basically a dime to pay a dollar. No legal investment is going to fix that.
 
Slyfox696 said:
Nonsense. If the Trust Fund were to run out in 2033, we could still pay over 75% of the benefits under current law. Hell, it was only in the last few years (when the economy turned bad) when the Trust Fund actually began paying out, after decades of taking in more than was spent on benefits.

We have 20 years to raise SS taxes to the point where we again take in as much as we take out. Like I said, I'm not really that alarmed.

Source: http://fas.org/sgp/crs/misc/RL33514.pdf
Click to expand...

Since you are OK with 75%. Just cut it to 82% today. You will save 7%.

Slyfox696 said:
We have 20 years to raise SS taxes to the point where we again take in as much as we take out. Like I said, I'm not really that alarmed.
Click to expand...

That is like someone who falls out a 20 story window saying I am not alarmed because I don't have a ground problem for another 19 floors.
 
nic11 said:
Right, and before a single retiree misses a check the appropriate measures will be made.

Think about what the political disaster there would be to those in power at the time.


David Cay Johnston:

With the coming bulge in retirees, Social Security will start to pay out more than it takes in 2021, according to projections in the latest annual report. Under current law the program would be able to pay only about three-quarters of promised benefits starting in 2033. But that scenario can easily be avoided through a combination of four policy changes that would ensure full benefits continue to be paid, though I fear Congress will continue to do nothing.

One would be restoring the Reagan standard that 90 percent of wages are covered by the Social Security tax, which now applies to only 83 percent of wages. If we went back to the Reagan standard, the Social Security tax would apply to close to $200,000 of wages this year instead of $110,100.

Two would be raising the Social Security tax rate by two percentage points. That tax hike could be smaller or even avoided if, three, we reignited the growth in wages. Median wages have fallen in 2010 back to the level of 1999. And, four, it would help just as much if we created millions more jobs, which since 2000 have grown at only a fifth the rate of population increases.

Social Security is not going broke | David Cay Johnston
Click to expand...

Even when his writing is timely - and here it isn't - the man is not terribly reliable. The demographics of the 3rd rail are crumbling. 5 years ago a near majority of people expected to be completely unaffected by the crisis forming in SS. Just 5 years later a majority of voting aged Americans expect to retire after the trust fund is exhausted. 5 years ago few voters would be affected. Today that changing rapidly.
 
azgreg said:
My thoughts come from the idea that politicians are more interested in votes than governing. I'm one of those 50 year olds you are talking about and since I see what's happening I have taken my retirement into my own hands. I will not need my SS benefits to get by. If they are there than nice, but I'm not counting on it.
Click to expand...

I don't disagree with you at all. I think at some point politicians realize that the votes are in reform rather than ignoring the problem. You are in the minority. Generational savings studies show that we have a decreasing level of preparedness for retirement.
 
JoeTheEconomist said:
Since you are OK with 75%. Just cut it to 82% today. You will save 7%.
Click to expand...
No, I'm just not freaking out about it. You and I have discussed this already.

That is like someone who falls out a 20 story window saying I am not alarmed because I don't have a ground problem for another 19 floors.
Click to expand...
No, it's not even close because the person knows at the bottom of the next 19 floors is the very end. In 20 years, Social Security will not be at its end. Why you continue to try and push this false narrative, when you clearly know better, is beyond my understanding.
 
JoeTheEconomist said:
The Trustees have released their report the summary is found here : News, the full report is found here : The 2014 OASDI Trustees Report

The focus continues to be on the length of the fuse ("The projected point at which the combined trust fund reserves will become depleted, if Congress does not act before then, comes in 2033") rather than the size of the bomb which is found on .... page 192. The unfunded obligation grew to $24.9 trillion in present value. Or in Trustee speak : " If the assumptions, methods, and starting values had not changed, moving the valuation date forward by 1 year would have increased the unfunded obligation by about $0.9 trillion, to $24.0 trillion. The net effects of changes in assumptions, methods, law, and starting values increased the infinite horizon unfunded obligation by an additional $0.9 trillion, to $24.9 trillion in present value."

The highlights : the system's shortfall grew by more than the system collected SOLELY because of the change in year.

Today more than 50% of the public expects to retire after the Trust Fund is exhausted.

Someone retiring today at normal retirement age has a longer life expectancy than Social Security expects to pay scheduled benefits.
Click to expand...

That's not true. There is a growing disparity in life expectancy between the haves and the have-nots. Yes, conservatives say we need to raise the retirement age to 67 on janitors because lawyers are living longer.

Moreover, even if the trust fund reserves are depleted in 2033, SSA will still be able to pay about 2/3 of the benefits. But the solutions are what really doesn't make sense, which is to cut benefits now so we won't have to cut them in the future.
 
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