by Tom Dyson, Casey Research:
The Social Security trust fund is dead broke.
Some readers might find this hard to believe. Maybe the government is sending you a check every month. Clearly, this means the Social Security system has some money, right?
In today’s special essay, Tom Dyson, co-founder of the Palm Beach Research Group, discusses this serious issue. As he explains, the government took YOUR hard-earned money and spent it on its bloated staff and military adventures.
Social Security is now collapsing under its own weight, and there’s nothing anyone can do to stop it. Soon, the government will have no choice but to cut Social Security benefits.
If you’re depending on Social Security, you need to come up with a Plan B today. We’ll explain how to shield your retirement at the end of today’s essay.
Fact: The Social Security trust fund has no money in it.
In 2014, the Social Security Administration (SSA) took in $786 billion through the Federal Insurance Contributions Act tax… $73 billion short of the $859 billion needed to pay claims.
In plain English, Social Security was in deficit mode.
By 2026, the SSA will run up a cumulative deficit of $1.6 trillion.
Wait… what about all the money you, I, and every other American has paid in since 1935?
How is that possible?
We’ve been told for decades the Social Security trust fund holds trillions in assets (cumulative Social Security surplus revenues since 1935) that are collecting interest.
Particularly, at the end of 2014, we were told the trust fund owned over $2.8 trillion in assets.
This is a lie. There isn’t one dollar in the Social Security trust fund. Nada. Zip. Zilch.
Remember, that $2.8 trillion sum is book assets, not actual dollars. The dollars were spent the minute the government collected taxes.
That’s because the government isn’t required to use money collected from Social Security toward Social Security purposes (according to the Supreme Court’s ruling in Helvering v. Davis). So, it’s used that money to fund everything from defense spending to payroll expenses.
The Treasury Department took in dollars from taxes but paid the SSA in paper IOUs… redeemable on a future date.
Translation: The left hand of the government took money from the right hand of the government and promised to pay it back on “some future date.”
Consequently, there are no real assets in the Social Security trust fund.
Now, add a couple more problems to the mix. Social Security has had two problems from the start.
The first is retirement age. When the government designed the program in 1935, it set the retirement age at 65. At that time, the average life expectancy of a newborn was just 59 years. Most people wouldn’t live long enough to collect benefits.
But the framers of Social Security didn’t address the possibility that life expectancies would increase. Today, life expectancy in the United States is 79.9 years.
The second major problem is demographics. When Social Security began, there were 41.9 workers for every retiree. It isn’t too difficult to fund a program where more than 40 workers support a single retiree.
But now, in 2016, there are just 2.8 workers supporting every person collecting Social Security benefits.
By 2030, the ratio will be 2:1.
There you have it. Zero dollars in the trust fund, higher life expectancies, and a big wave of people claiming more benefits.
Takeaway: More people are going to want money paid out for a lot longer… from an account that has no money in it.
No amount of financial smoke and mirrors will prevent the system from collapsing under its own weight.
Bottom line: If you’re not actively working on a plan B for the coming Social Security cuts, you should be. In late 2015, with the closing of two massive Social Security loopholes (“File and Suspend” and “Restricted Application”) as well as talks of other sneaky and indirect “clauses,” Congress is giving big hints of what’s to come in the months, years, and decades ahead.
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