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Post by bb2 on Feb 15, 2024 19:03:20 GMT
This article by John Rekenthaler at M*, ( www.morningstar.com/retirement/two-great-myths-social-security-reform ) , seems to be saying that social security benefits are not dependent on the state of any so-called "Social Security Trust Fund". He seems to be saying that benefits are paid from the general fund and so, the trust fund state is moot. Did I read him wrong? I read from the SSA itself that benefits are indeed dependent on the state of the fund. That SSA cannot borrow to pay benefits. ( www.ssa.gov/policy/docs/ssb/v70n3/v70n3p111.html ) Maybe I'm reading Rekenthaler wrong. I suppose his point about the SS myths is technically correct but moot, as congress still needs to act or benefits will drop. Rekenthaler says the article is one of his better efforts.
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Post by gman57 on Feb 15, 2024 19:14:07 GMT
I'm not sure if this is accurate but I read many years ago that the SS trust fund had tons of money at one time but the government "borrowed" it all long ago. Now all it holds is a big ole IOU from the government. (i.e. a bunch of government bonds which when you think about it is just an IOU)
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Post by bb2 on Feb 15, 2024 19:26:57 GMT
Yes, gman57, and that's been factored into the asset value of the SS Trust Fund. SSA will get those funds back from the general treasury to pay out benefits but once the accounting is all square, SSA can't get any more borrowed money from the treasury. That's as I understand it.
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Post by bb2 on Feb 15, 2024 19:34:19 GMT
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Post by yogibearbull on Feb 15, 2024 19:36:14 GMT
Social Security payroll taxes aren't in any separate fund, but go into the general Treasury fund. So, it's a Treasury IOU that can be drawn until this bookkeeping/tracking Social Security "balance" is $0. After that, Treasury will honor the IOUs only up to payroll tax intake.
This is important only when some talk about "investing" funds in another way. There are no funds available for that, but new legislation can direct future payroll taxes in another way.
Some other US guarantees are handled similarly , i.e. a draw-limit from Treasury is specified.
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Post by racqueteer on Feb 15, 2024 19:40:11 GMT
I'm not sure if this is accurate but I read many years ago that the SS trust fund had tons of money at one time but the government "borrowed" it all long ago. Now all it holds is a big ole IOU from the government. (i.e. a bunch of government bonds which when you think about it is just an IOU) That was my understanding as well, and it is certainly in character for politicians to treat any available funds as their personal piggy banks. Just looking at pension funds in most states, you can find numerous ones which are severely underfunded because of raids by politicians. NYS has tried for decades to get at the NYS Teacher's Retirement funding without success; the primary reason why it remains one of the best-funded pension funds anywhere. Then there was the "pass the NYS Lottery so all profits will go to education" push. So they get the lottery and do, indeed, pass on the Lottery money, but simultaneously cut the existing funding and give that away instead - frigging snakes!
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Post by bb2 on Feb 15, 2024 20:10:15 GMT
Yes, so Rekenthaler-like talk of SS benefits coming from the general fund, while correct, should not comfort anyone. The law says SSA cannot borrow to pay benefits. That's what's important. (Except that, like YBB says, SSA can't direct how to invest any "assets" in the trust fund, as there are no assets.) If I could contact Rekenthaler, I'd ask him about that article. Surprised he considers it one of his better efforts. I've never appreciated his stuff.
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Post by FD1000 on Feb 15, 2024 20:35:14 GMT
I'm not worrying at all about SS. There are several ways to get more money which will be implemented.
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Post by habsui on Feb 15, 2024 20:45:38 GMT
Technically there is no Social Security trust fund. SS was designed as a pay-as-you-go system, i.e. benefits are paid by the taxes collected. Past surpluses were invested in treasuries, thus the term "trust fund" started. It reached about $2.9T. Now that boomers are overwhelming the system, starting in 2021, some of these treasuries are being sold to pay for the shortfall in taxes. These will be depleted in about 10 years (I think..). Then, the taxes collected will cover about 75% of benefits.
Good luck.
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Post by Mustang on Feb 15, 2024 22:13:50 GMT
Rickenthaler creates a hypothetical situation then rants against it. He must have been having a bad day to write something that mis-informing.
Social security is actually a result of the 1929 stock market crash, the Great Depression and the Dust Bowl. People lost every penny they had in bank failures (FDIC insurance didn't exist). My grandparents were among them. The law was passed in 1935 during the heart of the Great Depression. Despite Rickenthaler's rant Germany didn't invade Poland until 1939.
Social security is funded through the Federal Insurance Contributions Act. In a round about way it is true that the money ends up in the general fund but that wasn't its purpose. Its purpose was to provide old age, survivor and disability insurance. Currently, the payroll tax is a flat 15.3%, half paid by the worker and half by the employer. When social security was created worker and employer contributions were more than enough to pay benefits. In 1945 there were 41.9 workers per recipient.
Surpluses are invested in special issue debt securities, like treasury bonds, these are considered one of the safest investments. Investing in the stock market was not an option. Remember this is only six years after 1929. The investment in treasury debt is the round trip to the general fund. But like all debt, the loan is supposed to be paid back. Money that goes straight to the general fund through other taxes is simply spent.
His comparison with the defense budget is a false comparison. The defense budget is constantly cut depending upon political will. In 1967 it was 9.4% of GDP. In 2022 it was 3.5%. Separate funding and the trust fund is a way of preventing that from happening to social security.
This system worked until the 1980s when the trust fund was predicted to go broke. At the time there were around 3.2 workers paying in for every beneficiary. The 1983 fix put the system back on its feet and the trust fund started building back up. Currently there are only 2.8 workers per beneficiary and by 2030 that is expected to drop to 2 workers per beneficiary. Not only has there been less going in but during the time of near zero interest the trust fund didn't earn as much.
While the trust fund can go broke, social security can't. It will continue paying benefits on what it receives from payroll taxes. Current estimate is that it will continue to pay 80% of promised benefits.
Social security can be fixed the same way it was fixed in 1983. Rickenthaler thinks we can reduce our national debt on the back of social security. How? By not paying back what is owed? The entire world invests in US treasury bonds. What is owed needs to be repaid.
Our national debt will never be paid back. I am sure Rickenthaler knows the difference between deficit and debt. As a balanced budget advocate, I think the best we can hope for is to cut the deficit and stop increasing the debt. But, we don't even have the political will to do that.
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