If you expect Social Security to be there for you…

…or any government-run pension for that matter, read what Bayou Renaissance Man has to say in his post “For the umpteenth time, don’t rely on Social Security.” He points out that governments don’t have to live up to their promises, so don’t expect them to when planning your retirement.

Here’s what you absolutely, rock bottom, need to know about Social Security:

• Social Security is inherently unstable. When Social Security started paying out benefits, we had 40+ workers for every retiree. That dropped quickly, but we still had over 5 workers per retiree in 1960. It’s been going down from there. Right now, we’re under 3, which is too few to sustain benefits at the current rate. By 2029, we’ll be around 2.1, too few to even pretend that this retirement plan can offer “security” to the elderly. But, hey, pretty much all of the people who sold Social Security to a credulous public are dead, so they don’t care.
• Per the Supreme Court, we don’t have a right to any of the money we put into Social Security. What Congress gives, Congress can take away. Keep that in mind the next time you see an indignant meme on Facebook saying that you are owed Social Security because you paid taxes into it.
• The trust fund was always meant to run out once the Baby Boomers retired. If this is a surprise to you, get educated because you don’t know the fundamentals about the very retirement system you plan to depend on to overcome your own lack of retirement saving.
• The trust fund will run out in 2034, per the Social Security Administration’s latest estimate.
• Back in the early 1990s, the SSA estimated that it would run out in 2042 or so. Oops.
• Once the trust fund runs out, benefits will be slashed by about 22% to start.
• However, your benefits have already been slashed because the federal government has been deliberately underestimating the rate of inflation for years. This underestimation will get worse now that cost of living increases are based on the Chained CPI, which I mentioned here.

Since Social Security benefits are already too low for most people to live on without a supplementary income, you can imagine what it will be like in 10 to 15 years. That’s right about the time when the 22% benefit drop will hit.

This is why you must act now to secure a retirement that does not depend on Social Security. It’s not fair, it’s not right, but it’s reality.

So suck it up and start planning.


Update: Welcome, Instapundit readers. This post is meant to be a quick and basic primer on Social Security, but as always feel free to comment on aspects I didn’t mention. For example, I was reminded that Social Security is not meant to be a person’s only retirement…


  1. sean giefing

    how can the monopoly supplier of the currency run out of the currency. the government can make a political decision not to pay or reduce benefits but they are in no way revenue constrained.
    you may want to make an inflation argument but you need to do that in the context of falling aggregate demand as the population continues to age.

    1. Ken

      “you may want to make an inflation argument but you need to do that in the context of falling aggregate demand as the population continues to age”

      Aggregate demand increases with aging populations.

    2. Dawn Smit

      Though the currency creator can’t run out of currency, it can run out of value, so even if it waves its wand to add more money (always a danger as debt and obligations rise), that new amount won’t give the retiree any more buying power than the pre-inflated money. For the purposes of this warning post, the effect would be the same: not enough purchasing power. From a macroeconomic perspective, it would be even worse, but that’s a post for another day…

  2. dwick

    While your points are valid, including the lament that “Social Security benefits are already too low for most people to live on” with no context will lead those same people to whine that the Social Security system is at fault.

    You really should start off here by reminding folks that, just as the minimum wage was never intended to support a family of four as a ‘living wage’, Social Security was never intended to be/provide 100% of one’s retirement income. It was only ever meant to be a minimal subsistence-type safety net – not a hammock.

    1. Dawn Smit

      “Social Security was never intended to be/provide 100% of one’s retirement income.” Interestingly, I was just talking about this with some friends on Facebook. I do not know if the Social Security Board/Administration made this clear in the early days, though by the time of the changes to the law in the 1980s, the SSA had added clear and unambiguous wording to that effect. (I researched when exactly this changed, but darned if I can find my notes.) So at this point, decades later, NO ONE can claim they weren’t told.

      That said, even in 1936, the Board told workers how much they could expect to receive, which let them do their own math (though I doubt the workers would consider inflation). Of course, in the very same document, the Board also stated, “What you get from the Government plan will always be more than you have paid in taxes and usually more than you can get for yourself by putting away the same amount of money each week in some other way.”

      Your point is well taken.

    2. James Solbakken

      “It was only ever meant to be a minimal subsistence-type safety net – not a hammock.”

      I knew that, but I’m one in about 10 million. Most people believed what the politicians and fake news media wonks told them, that Socialist Security and Mediscare were the only things that kept them alive and the Rethuglicans wanted to abolish them because they want us all dead. Er something like that.

      Isn’t it obvious at this point what Socialist Security was always about, a way to suck up people’s money and get away with it by dribbling back out meager benefits to give the illusion that it was not basically a Ponzi scheme? Pretty soon the benefits will have to be so meager that even the stupid idiots will figure out that it is a scam. What the stupid idiots will not figure out is that it was a scam from its inception; instead the stupid idiots will believe what they will be told, that the Rethuglicans stole all the money and ruined a great program.

    3. Ken

      “minimum wage was never intended to support a family of four”

      Of course. It wasn’t designed to improve wages at all. Minimum wage laws are designed to PREVENT people from working, making them dependent on government handouts. Beggars are easier to please than independent, hard working people. That’s another reason SS was implemented.

      These are evil programs designed by evil people to undermine the basic American principle of liberty.

  3. kennymac

    The Social Security Trust Fund is like the briefcase in the movie Dumb and Dumber. Full of IOU’s payable to ourselves.

  4. CptNerd

    I’m within 7 years of retirement, after having major financial problems some years back (long-term unemployment eating into my retirement savings, choosing rent over homeless retirement), I don’t have any option other than to rely on SS. If I have to rely on my savings I might as well pipe my car’s exhaust into the driver’s side now, because there’s no way to save the millions of dollars they claim I’ll need.

    1. Dawn Smit

      Being within 7 years of retirement does make it tough. You don’t have as much time for compound interest to work its miracles. But that’s still enough time to buckle down and start minimizing debt (or even pay off debt entirely) and reducing your “economic footprint” so you can live off less. Also, retirement doesn’t mean you can’t work side jobs. Just go in with your eyes open. Absent a decent fix in the next 2-3 years (I’m not holding my breath), I predict it will start getting rocky about 2028-2029, and that’s what I’m planning for. Debt free in 2025, baybeee! That’s my goal.

  5. Chester White

    There is no S/S “Trust Fund.” It’s a pile of bonds owed by the government to itself. Could be $1, could be $1,000,000,000,000,000,000,000. Means absolutely nothing.

    It’s like you taking a piece of paper out of your right pocket, writing “IOU $1,000,000,000,” sticking it in your left pocket, and thinking you have accomplished something.

    1. Dawn Smit

      I’ve discovered that bringing up the trust fund when telling people that they can only depend on themselves (and maybe their families) to save for retirement sends the conversation down a rabbit hole, but what you say is true. It’s an accounting gimmick.

      That’s one of the reasons why I predict that things will come to a head in 2028-2029 rather than 2034. It’s the point in time where all that’s left in what they call the trust fund will be the interest on the interest on the IOUs of the money that’s already been spent. (Say that 5 times fast.) Add to that what the federal debt burden will be as a percentage of GDP, and it’s gonna end in tears before bedtime.

  6. sean giefing

    an aging and shrinking population reduces gdp and aggregate demand. spending patters change when populations age but you can not argue that social security is too small to support above subsistence income and at the same time argue that aggregate demand increases when populations age/get smaller.

    where is the inflation in japan – aging population and debt to gdp the highest in the history of any industrial nation.

    actually the post was saying the government wont have to live up to its obligation to pay and the trust fund was out of money and benefits would be slashed. its a fallacious argument.

  7. Pingback: Social Security: How many people were expected to receive benefits? – The EclectiSite

  8. Chester White

    I think I once posted here about how there is no Trust Fund, other than as an exercise in hand-waving. Anyone who mentions it seriously does not know what is going on.

    The “Trust Fund” is a pile of IOUs from the government to itself. Same as if you took a piece of paper from your right pocket, wrote “IOU $1,000,000,000,” put it in your left pocket, and think you accomplished something.

    Or think of it like this: What happens now with the “Trust Fund”? A piece of paper gets sent from one office to another to be “cashed in.” But what is that? The Treasury cancels the paper and has to come up with money to give out. So they tax or borrow it. What if there were no paper and the Treasury needed money to pay Social Security? They’d tax or borrow it.

    Exactly the same. Exactly. Just numbers moving around.

    It’s not like the “Trust Fund” is IBM bonds or stock or something, which would be an actual asset.

    Whether the “Trust Fund” is $0, $100, or $1,000,000,000,000,000,000,000 is completely irrelevant.

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