Over the past few years, we have been hearing a lot about the doomsday predictions regarding the US Social Security Scheme. We all are lavishly paying top $$$ into the fund and I thought about doing some investigation into where all this money is going. At the same time, I wanted to be able to predict the chances of me getting benefits in future.
Quick One-Line Summary: Though I will probably get Social Security Benefits, it will be only a fraction of what I should have been getting, based on my contributions.
SSA (Social Security Administration, www.ssa.gov) gets its yearly income from SS Taxes, which we all pay, whether we like it or not. The major expense of the SS Fund is the payment of benefits. There are other expenses incurred while running the SS Fund, just like with any Mutual Fund and such. As you probably know, both the Employers and Employees pay into the SS Fund.
I went through the SSA Trustee’s Financial Reports for the past decade.
2001: 46 Million people were getting SS Benefits. 153 Million people were contributing into the SS Fund. Total Income (I.e. Taxes) was 602 Billion USD. The Total Expense (I.e. Mainly Benefits) was 432 Billion USD. The overall SS Fund had 1.2 Trillion USD “surplus”.
2010: 53 Million people were getting SS Benefits. 156 Million people were contributing into the SS Fund. Total Income (I.e. Taxes) was 807 Billion USD. The Total Expense (I.e. Mainly Benefits) was 686 Billion USD. The overall SS Fund has 2.5 Trillion USD “surplus”.
Things look under control? The main problems:
(01) Medical advancements ensure that people live much longer than what the blokes who set up SSA imagined (which is a good thing. Who wouldnt wish that people live happy, healthy and longer lives?). Such a scenario results in benefits being availed of for a longer duration of time, per average beneficiary.
(02) A huge portion of the Work Force, the so-called Baby Boomers are set to retire over the next few years, putting even more strain on the system. As per SSA’s own projections, in 2016, SSA will be pulling in lesser Income that its Expense. Note that over the past decade or so, SSA always managed to get in more Income that what it had to pay out.
(03) Where is all this Surplus stored? In Government Bonds! I.e. Indirectly, we have almost the entire SSA Surplus invested in US Government Debt.
Now, considering all this, you think US Government (a.k.a Politicians) should be more careful with the ample Taxes that they bring in? It appears to me that both Democrats and Republicans, irrespective of the Election rhetoric, once they get into Office, loves to spend like Millionaires, using the “Credit Card” we provide them through our Taxes …