Social Security warns it cannot pay promised benefits!

by

William Larsen

October 29, 1998, the Social Security Administration warned today it is facing long-range financial issues. Kenneth S. Apfel, Commissioner of Social Security warned "Some people are concerned that Social Security won't be there in the future. The program has changed in the past to meet the demands of the times, and it must do so again. Today we are working to resolve long-range financing issues and to ensure that future generations of Americans can count on the same financial protections from Social Security as past generations did." This is dramatically different from years earlier when they stated "Social Security has never failed to pay benefits."

May 1, 2000, the Social Security Administration warned again today they will exhaust the Social Security Trust funds in 2034. Kenneth S. Apfel, Commissioner of Social Security warned "By 2034, the trust funds will be exhausted and the payroll taxes collected will be enough to pay only 71 percent of benefits owed." We're working to resolve these issues.

May 7, 2001, the Social Security Administration warned again today they will exhaust the Social Security Trust fund in 2038. Kenneth S. Apfel, Commissioner of Social Security warned "By 2038, the trust funds will be exhausted and the payroll taxes collected will be enough to pay only 73 percent of benefits owed. We'll need to resolve long-range financial issues to make sure Social Security will provide a foundation of protection for future generations as it has done in the past"

January 4, 2002, Social Security Administration warned again today they will exhaust the Social Security Trust fund in 2038. Jo Anne B. Barnhart, Commissioner of Social Security warned "By 2038, the trust funds will be exhausted and the payroll taxes collected will be enough to pay only 73 percent of benefits owed. We'll need to resolve long-range financial issues to make sure Social Security will provide a foundation of protection for future generations as it has done in the past"

Should workers be concerned about these warnings? Absolutely, the Social Security Administration has promised more benefits than the payroll tax generates. Its current liability is $12 trillion and growing. This year alone, a worker's share of the liability will increase from $81,000 to $86,200 by years end. With companies warning during this recession, it makes Social Security's financial condition that much worse. This trend in warnings, with no let up in sight, should make all workers take notice, especially when the sole revenue source is taxes.

Most investment advisors recommend no more than 20% of ones retirement savings be directed to anyone investment. However, this recommendation is seriously violated with Social Security where it is calculated the majority of American Workers have invested over 65% of their potential savings for retirement in one entity, "Social Security." It is highly recommended workers divest themselves of Social Security. The future revenue growth for Social Security is dim at best, due to a much lower birth rate. But on top of this, even higher wage growth is not going to work. Higher wages only result in higher initial Social Security benefits

Based on paying full benefits, the rate of return for the average workers is about 2%. But with this latest warning of paying 73% of benefits, the rate of return for the average worker just went negative. It really make little sense to borrow money at 6% to 7% for a mortgage and turn around and contribute over 65% of your savings each year to Social Security with such dismal prospects. But, then Social Security likes it. The worker in essence is paying Social Security a fee for taking their money and losing a good portion of it.

There is only one way to divest yourself of Social Security and that is through legislation. The worker can do this by writing their representatives in Congress. The worker might also exercise their power by voting for a candidate who supports diversification, so that not all their eggs are in the same basket.