This month, the Trustees for Social Security and Medicare just released their annual report. It was five months late. The data is dismal.
Social Security was established by President Franklin D. Roosevelt’s new deal plan in 1935. It was created to provide a supplemental security income for the elderly or disabled people. The program is funded through payroll taxes and is predominately a pay as you go program.
According to the trustee report, 171 million Americans paid $869 billion on Social Security taxes in 2016. The recipients received $922 billion in benefits or $53 billion more than was collected in taxes. Next year the trustees are reporting that they believe there will be a $60 billion shortfall.
Another way to look at social security: there are less than three people paying for social security for every one person receiving social security benefits. The US Bureau of Labor Statistics says the fastest growing demographic in our country by 2024 will be people over age 65. We will have between 80 million and 100 million recipients by 2030. By 2030 we will have TWO taxpayers paying for every ONE recipient of benefits.
Do you think this program is sustainable? How can our government continue to spend more money than it brings in?
Currently, the unfunded liability for Social Security is around $15 trillion. Unfunded liabilities are the promises we have already made to Americas. We need $15 trillion to just support the current recipients of Social Security. This does not include the 10,000 baby boomers retiring everyday for the next 15 years.
The social security problem is further compromised by life expectancy. In the trustee summary (page 4), the government admits to using age 75 as life expectancy for its social security calculations. This is a total farce! Today’s life expectancy statistics are significantly higher. A man that reaches the age of 65 has a life expectancy of age 86 and a women reaching age 65 can expect to life until age 88. For every year of additional life expectancy, trillions in unfunded liabilities are added to the total.
For the summary or full report, please Google “Social Security and Medicare Trustees Report 2017”. The top entry will be the Trustees Report Summary. That’s what you want. It summarizes the full 269 page report and does so in 25 pages. This is official as it comes right from the government and the trustees for those two programs.
Early education is the key to financial success. My goal is motivate you into action. Now is the time to plan your financial future so you will be in-control of your financial future, not the government!
Today’s lesson – Social Security is unsustainable in its current form. This will not be the government program that gets you through retirement.