Social Security now expected to run short on funds in 2035, one year later | Hacker News Reader

Social Security now expected to run short on funds in 2035, one year later

cnbc.com

19 pointspaulpauper75 comments

Social Security was established as a pay-as-you-go system. In 1987, the income side went into a significant and unprecedented surplus that accumulated by 2020 into a $2.8T Federal government accounting entry called the "Trust Fund"[1]. Al Gore's "lockbox". We've been anticipating the "bust" forever because it's still pay-as-you-go and the demographics and structure don't work past the 2030s and never have.

This "Trust Fund" is pretty silly, especially in today's cleptocratic political environment. It's not like the trustees can invest it according to their fiduciary duties. And, it's not fair an entire generation has been paying more than required to support current retirees, only to have the system revert to pay-as-you-go for their own retirements. For this, as many economic gems, we apparently can thank Alan Greenspan[2]?

[1] https://www.ssa.gov/OACT/STATS/table4a3.html

[2] https://en.wikipedia.org/wiki/Greenspan_Commission

Very easy to fix, but one US party does not want to fix it. That party has spent the last 40 years trying to destroy it.

It's telling to me that I completely sincerely have no idea which party you mean.

That's wild to me. Are you in the US and do you generally pay attention to national news?

I'm in the U.S., but I stopped paying attention to national news years ago when I realized how much of a waste of time it is to worry about things I can't change when I have a hard enough time living consistently with my own values day in and day out.

It wasn't 40 years ago, though, and I don't remember having seen any actual efforts to destroy SS from either party. I've seen both sides refuse to try certain things to save it, but I don't remember anything I'd have called an attempt to destroy it.

I guess it depends on your definition of "destroy Social Security", but mine would include the efforts by Republicans to privatize it during the George W. Bush administration.

Republicans despise anything socialist, and Social Security is that. Unfortunately, the program is too popular to cut, but they are looking at the funding crisis as an opportunity to at least scale it back. Social Security needs additional funding, not benefit cuts.

People should be allowed to opt-out, but that would destroy the system because the public doesn’t actually want it.

Social Security is incredibly popular, to the point people actually want to expand it:

https://www.nasi.org/learn/social-security/public-opinions-o...

> Moreover, Americans are willing to pay more to keep Social Security strong. About 8 in 10 (77%) say it is critical to preserve Social Security even if it means increasing the Social Security taxes paid by working Americans. An even higher percentage (83%) say it is critical to preserve Social Security even if it means increasing the Social Security taxes paid by wealthy Americans.

NASI is the National Academy of Social Insurance, which doesn't mean their results are wrong but does mean you'd need to pay very close attention to what they're doing in these surveys.

For example, they list reasons their respondents give for supporting social security and the first is "I know that I will be receiving benefits when I retire", but the point of the story we're commenting on is that they don't know that. They've been told that, and it might be true, but on the current trajectory it's not currently going to be true. If the NASI told them that social security was unsustainable, that their money being paid in wasn't being saved for them and they might well have fewer benefits than they expect or that seem fair, would they still agree?

I think they addressed that by including the word "preserve," however the PDF summary of one of the reports[0] makes that explicit:

> Six in 10 respondents (62%) say they are not confident about the future of the program. Among those not receiving Social Security benefits, 68% lack confidence they will receive all of their earned benefits.

The report goes on to detail how people believe social security is far worse off than it actually is (likely, IMO, due to fearmongering from one particular side.)

0: https://www.nasi.org/wp-content/uploads/2014/10/HIGHLIGHTS_A...

If that’s true, then they should allow people to opt out. There’d be nothing to worry about.

I know people who aren’t confident it’ll be there when they need it, but I personally know of no one who doesn’t want it.

I know you don't know me personally, but I don't want it. Living off of my children's labors feels deeply icky to me unless they offer their support willingly, especially when they're at the time in life that they most need to be investing in themselves and I've already had the opportunity to do that.

What action could be taken to fix it?

Removing the income limit without increasing the benefit amount (at least not at the same rate) would be a huge improvement and should be about as simple as any tax change can be.

I have never understood why there is an income limit in the first place.

When Social Security was first passed into law it was sold to the public as a sort of compulsory annuity, not a means of mass wealth redistribution.

I applaud whoever tries to minimize/reduce/remove a mandatory ponzi scheme.

I applaud whoever values this society, culture, & these people. I applaud a culture that works to help old people.

And I curse those with recklessness in their hearts that would opt to simply give up.

Give up on the ponzi scheme?

Giving up is the cowards route. How do we figure out what to do?

It's only a "ponzi scheme" because of hard to guess demographics. It requires help & correction I'm my view. It's bleak sad & vicious anti-human nihilism to "give up". That feels low, cruel, and an unimaginable horror to me. Giving up & doing nothing is an opting for unimaginable brutal cruelty & suffering. How can I even start to sympathize with that?

It's a ponzi scheme structurally and independent of demographics, this is tautologically true given the definitions of how these systems work and what Ponzi scheme means. Ponzi schemes don't only become so when they go deep into the red, they are Ponzis right from day one if they work by paying out early investors from the fees paid by later investors.

Giving up in this context means switching to a better system, not doing nothing. It's a really bad habit of political debate to assume that if the government provides a service, only the government can provide that service and anyone who criticizes their bad provisioning is therefore arguing for no service to exist at all (and therefore that they must be inhumane and evil). It's just a cheap and nasty debating tactic that you should avoid. "Giving up" means simply for all pension and social insurance to be managed by the private sector. Governments could maybe mandate you buy a policy, and they'd still regulate the private investment funds, but that'd be the limit of their involvement.

The advantage is that governments are much better at enforcing rules on companies than their own departments. There are lots of rules governing how investment capital is managed if you're in the private sector, but if government run pension funds were companies the management would all have been put in jail decades ago, and the Justice Department would be crowing about how it had protected vulnerable citizens from them. Keeping capital savings and management in the private sector (which is good at it) and rule enforcement in the government (which is good at it) would result in a fairer and more trustworthy system over the long run.

You've had periods where the Democrats control the Presidency, they control the House, and they control the Senate. If it is so easy to fix, why wasn't it fixed?

The answer is that it is not easy to fix, fixing it involves raising taxes, and people don't like taxes.

So the can gets kicked down the road.

Actually, the tax limit has been risen a few times, I remember when it was ~68000 and then it ended up being ~98000 in the late 90s, maybe in the Clinton Admin.

I think it is now ~163000, I can only assume that that was done by Obama.

In today's environment, as you say, I doubt it will be raised until 2/3 of the Senate and the Pres wants to raise it.

The social security tax limit is indexed with inflation and updated annually by the IRS without an act of congress. This indexing is factored into their funding calculations.

We’ve also had periods where Republicans controlled Congress and the Presidency, and they didn’t “destroy” Social Security like we’re told they would.

It’s a difficult problem to fix, and I suspect some politicians prefer the status quo so they can use it as a wedge issue. (as you see in the comments here)

I’m 40 and at no point in my life have I trusted that social security will exist for me or anyone beyond my generation so this is just more reinforcement of that

You’re on your own folks

And when it runs out, those of us who have made sacrifices now to provide for old age will be a wealthy, "privileged" target.

Those of us who have the foresight to make such sacrifices should also have the foresight to structure our investments to make them resilient against redistribution.

You can fight taxes, you can’t fight a central bank money printer that inflates it away. There’s only so many hard assets.

Wealth is a shared delusion, and laws are mutable and a function of the times and zeitgeist. Keep this in mind.

I suppose the "our" in that "our investments" is the socialist "our".

Your investments? Nay, comrade. OUR investments.

But only because there was no will to sacrifice the wealth of the wealthiest, all a fiction of effectively fancy spreadsheets. Surprised this would catch up with us?

Being in a position to make sacrifices for retirement can also be a privilege.

I have always expected nothing. But I'm 62 now, and it looks like there may be something there for me after all.

For you, it's not looking great. But it has never looked great, and yet it's still (so far) paying full benefits. Don't plan on it, but don't be too surprised if you get something...

> I’m 40 and at no point in my life have I trusted that social security will exist […]

It will exist mostly intact, just not necessarily at 100% benefits:

> If Congress does not act by 2035, the trust fund reserves are projected to be depleted. However, the income from Social Security taxes would cover 83% of scheduled benefits.

[…]

> By the year 2098, when I will be turning 117, they project the tax revenue will cover 73% of the benefits. That’s a long runway to shore things up.

* https://awealthofcommonsense.com/2024/05/is-social-security-...

It was never predicted to go to zero.

https://www.ssa.gov/oact/trsum/#:~:text=The%20Trustees%20pro....

Not sure why the media is running this title but from the official report:

“ The Old-Age and Survivors Insurance (OASI) Trust Fund will be able to pay 100 percent of total scheduled benefits until 2033, unchanged from last year's report. At that time, the fund's reserves will become depleted and continuing program income will be sufficient to pay 79 percent of scheduled benefits”

Short on funds to provide 100% benefits:

> If Congress does not act by 2035, the trust fund reserves are projected to be depleted. However, the income from Social Security taxes would cover 83% of scheduled benefits.

[…]

> By the year 2098, when I will be turning 117, they project the tax revenue will cover 73% of the benefits. That’s a long runway to shore things up.

* https://awealthofcommonsense.com/2024/05/is-social-security-...

It was never predicted to go to zero.

Perhaps this is my cynicism showing, but it's the Boomers who caused this problem. Let them suffer the shortfall as the natural consequence.

They've been the political decision-makers most of their lives because there were so many more of them than their parents. And they can criticize Millennials for receiving (?!) participation trophies they handed out until their faces are as blue as their hair, but they've systematically screwed the economy to their benefit their entire lives.

If there aren't enough people in the workforce and wages aren't high enough for payroll taxes to pay more than 83% of their SS benefits, then let them only receive 83% of their SS benefits.

I'm all out of sympathy for their entitlement.

It's not gonna be them, it's gonna be Gen X that gets the shaft on this one and probably millennials that raise the capital gains taxes on the old people when they finally age into leadership roles and the old people by that point will be Gen X again.

Quite a few of them will be dead by 2035. The earliest boomers were born in 1946, that’s 89 years old. They’ll have been collecting benefits for decades by then.

> Perhaps this is my cynicism showing, but it's the Boomers who caused this problem. Let them suffer the shortfall as the natural consequence.

If you want people out on the streets, that would probably be a good way to do it:

> Nearly half of senior citizens receive 50% or more of their income from Social Security. One in 5 people 65 or older gets 90% of their income from the program.

* https://awealthofcommonsense.com/2024/05/is-social-security-...

There are a lot of poor Boomers out there, and SS is the only thing preventing them from being completely destitute.

Whose fault is that? Actions have consequences.

This is definitely the parentified child in me speaking, but I'm sick of being the adult to this generation of perpetual children, especially while being mocked by them the whole time for their actions.

Look at the stats about how inexpensive everything was back then relative to wages. If someone couldn't manage to save anything and succeed financially in that environment, compared to today's? They must not have been trying.

I recognize some people faced extenuating circumstances, but not HALF of people.

My dad's a perfect example. He complains that he prioritized "living for today" when he was young, but now it's tomorrow and he barely has a pot to piss in. But it's his own fault, and I would really like to see Boomers face that reality for the first time in their lives.

Could the US implement something like Australia’s superannuation? Every year, x% of your wage is put into a fund you choose, which invests according to your choice of strategy. You’re not allowed to access it until retirement age, and you get tax benefits for contributing to it. Would it be unconstitutional to force employers to put aside wages like that?

That's opting into a 401k, essentially. Employers often match employee contributions to some amount. But it's not compulsory nor is it universally available. IRAs are, however.

I have an out-of-the-box suggestion: For any parents who have been paying in but agree to forego receiving any payments from SS, their children would have a choice:

1. Operate under the existing system. Pay into Social Security, and withdraw as normal when they're older.

2. Have 7.65% of their income invested in a total stock market index fund, which their employers would match. If they want, they can reduce their allocation below 100% stocks once they're 50 or older.

We're already below replacement value for children per family, so while there would be a few families large enough for the benefit to the children to be significantly more than what the parents are giving up, it's still going to take quite awhile for the existing system to wind down. Slow end, simple replacement.

This can be shored up by securing additional funding. Republicans want to “save” Social Security by gutting it.

The most equitable way to fix this is instead of reducing benefits to 83% of normal across the board, they should reduce the benefits for the rich who do not need it anyway.

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For someone who doesn't know anything about SS how did the Europeans figure it out? Is it because they have smaller populations?

They’re also delaying retirement age, which is effectively a benefit cut.

EU citizens generally pay much higher taxes, and get better retirement benefits for a wider variety of jobs, many of which would not be a career path that would have a good benefit package in the States.

And insurance that's not coupled with your employer.

The flaunting of wealth also isn't exactly culturally as strong as it is in the States.

My plan in the States -- in all seriousness -- is to be the local mountain hermit. I'll live semi-permanently in some hidden shack, I'll come down to town for odd jobs, hands-outs. Fringes of society for me.

I believe they are heavily importing immigrants currently. Not really possible to "solve" a ponzi.

could you say more about what makes it a ponzi scheme? in my country there's traditional retirement account you contribute to from your salary whether you work at a private / public org and you get that when you reach 65 is that bad idk much about life but especially clueless about these things

I wouldn’t call it a Ponzi scheme, but it’s less you get an account and more you pay into a big account and get a stipend based on your peak income. So money we pay now goes to pay current retirement benefits. And hopefully by when I retire the next generation will be paying so I can retire.

this is so maddeningly confusing to my brain that's used to you get what you put in

can you explain like I'm 5-10 why is the fund running out if every generation pays? are people in the workforce right now not paying into it or has there been a significant change in demographics between 1983 and now? wouldn't an entire generation need to stop paying for this to happen or is that ismplifying it

> has there been a significant change in demographics between 1983 and now

Bingo. The baby boomer generation that is hitting retirement now is living longer on average than any prior generation. Basically the math for payouts expected a certain amount of eligible people would either not make retirement age or would only collect retirement on average of X years before dying. That looks to be a miscalculation at this point:

https://www.investopedia.com/articles/personal-finance/02251...

No, smaller populations doesn't help. It reduces the amount of benefits paid out of the fund, but it also reduces the payments into the fund.

Some countries have solved the problem, while others haven't. There is not much to figure out. There are three basic tools: higher contributions, higher retirement ages, and lower benefits. You just have to make decisions. Ideally decades in advance, to avoid unfair sudden changes.

They tax people, especially high earners, at a higher rate than Americans. It’s not complicated. The US is the wealthiest country in the history of the planet. We could afford to fund social security if we wanted to but some people are opposed to it.

if you don't mind me asking why? won't everyone just get the money they put in from their salaries? in my head it's like a way to save pre-tax am I simplifying it too much

Once you start getting social security, you keep getting it until you die. Some people take out more than they put in.

Which countries?

Scandinavian is the usual example but like the UK for instance lived there for a bit everyone got dental / health through the NHS that would be the equivalent of medicare right? it didn't seem to be as political

The trick is to have a homogenous population of Nordic people.

We did not... In essence it is even more pay as you go. Tax everyone more and distribute that to pensioners. Though quite many pensioners are rather poor. Some with high earnings in late career do quite well.

Should I give up on any chance at social security in 40 years?

2035 is in 11 years.

Yeah, but the trust fund's running out doesn't mean there are no benefits anymore. It just means the only funds to pay them come from current payroll taxes. The trust fund can no longer make up the shortfall.

SS may very well survive at reduced benefits a lot longer than 2035. Whether someone should give up hope of any benefits in 40 years is a fair question.

Somethings got to give if SS dries up, what that is I do not know. I have hopes for a more robust, more ahem socialized healthcare system, but that doesn't seem likely with current trends

As long as there are workers, it doesn't dry up entirely. I guess the problem then becomes the fact that U.S. fertility has already fallen below the replacement rate.

Yes. Worst case you will be pleasantly surprised.

Personally I would be thrilled if civilization survived another 40 years.

No. It won't go away entirely. Plan on getting at least 70%, and vote to get the full amount.

No. Government needs to shore up the funding for Social Security. Although, it’s hard for the government to do anything meaningful when Republicans are in a position to block it.

Very unlikely. Plenty enough 70 year olds can still do enough damage... So no payments is very unlikely situation. What I would expect is much lower standard of living and maybe not getting the most expensive medical treatments.

Specially later I think is something that as society we have to accept. You can not keep everyone alive as long as possible. On other side, with AIs and lot of drugs becoming generic we might be able to medicate affordably for quite a while.

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