Monday, April 23, 2012

Hey, guess what blogger you love turns 65 in 2033?

CBS News: "Social Security: Trust fund in the red by 2033."

Not to worry folks. Senator Tom Harkin is here to set the record straight:
Social Security is financed by its own revenue stream, the payroll tax and, by law, it cannot add to the deficit. Since the payroll tax will still be collected, even after 2033, Social Security will be able to pay 75 percent of scheduled benefits going forward, assuming that Congress would take no action to address this problem.
Yeah, I think that last part is a pretty fair bet.  Harkin wants you to know that all that money you paid into that FICA box on your paycheck - well - you'll get a portion back if you live to 65 or, in my case, 67.  The rate of return would be far, far below what you'd have if you just put that money into a 401(k) or savings account but you'll get it back because the government said so.  Why would you ever want to opt out of a such a great program?

Because you can't.

Related - From Hot Air.

And this - LA Times: "Social Security is slipping closer to insolvency."


Anonymous said...

You might want to check the rate of return on a savings account. It makes Social Security look like a winning Powerball ticket.

Eric said...

Social Security's own actuaries peg the rate of return at somewhere around 2-3% depending on income bracket. I suspect that with an automatic 25% reduction in benefits in 2033, that rate will turn negative.

Also: if you die before 65/67 - tough noogies.

Steven Glass-Seagal said...

As long as we're doing hypotheticals about Social Security losing 25% of its value, I wonder how the math would have worked out had Bush succeeded in moving it onto Wall Street in 2005?

Eric said...

Well, let's see: the DJIA was at 10500 in April 2005 and it's at 13000 now. So that's a 23% return on investment in seven years.

Not too shabby. And higher than zero.

Anonymous said...

I turn 65 in 2031. I assume I'll still be working unless I'm a casualty in the next civil war/ revolution.

Anonymous said...

The DJIA has also gone up over 45% during Obama's Presidency. And yet, he has destroyed the economy, with businessmen afraid to invest due to the uncertainty.

It makes sense, if you want it to. Because if it didn't, we might start suspecting that using 30 specific stock values as a snapshot of the market as a whole has always been a very imperfect construct that has minimal relevance to the small investor... and then where would we be?