SS Trust Fund DIED in 2009

[jtabeb]

From ZH, looks like SS will have no cushion at the end of this year! (As in the trust fund will be gone!)

(see I TOLD you we are going to do an Argentina)

http://www.zerohedge.com/article/ss-...ar-results-ugh

Now look at the reports released today. Total tax receipts were less than the disbursements. This was not supposed to happen until 2016. It happened last year.

There was a $100 billion surplus for the year. But compare that to the $190 Billion surplus in 2007. We have lost $90 Billion in just two years. But this number should be much higher than the 07 surplus. It was assumed that the Fund would have larger and larger surpluses for years to come. The 2008 Trustee Report (signed by then Chairman Hank Paulson) provided a set of Intermediate Assumptions for the Fund's surpluses looking forward. As you can see we missed the 2009 target of a $220b surplus by a cool $120 billion. As of 12/31/09 the funds assets are behind that 08 schedule by $155 billion.

[ThePythonicCow]

Re: SS Trust Fund DIED in 2009

From ZH, looks like SS will have no cushion at the end of this year! (As in the trust fund will be gone!)

The Social Security "trust fund" is just an accounting gimmick. Overtime, the amount collected each year in payroll FICA taxes covers a diminishing proportion of the amount paid out. No particular point is anymore critical than another; the net contribution of Social Security (FICA taxes minus payouts) goes steadily down, from something positive in the past to something negative in the future. The point where the net contribution passes through zero (apparently in 2009 from your report) means no more than the point that the thermometer passes upward through 100 degrees Farenheit to the soon to be boiled frog.

[jtabeb]

Re: SS Trust Fund DIED in 2009

The Social Security "trust fund" is just an accounting gimmick. Overtime, the amount collected each year in payroll FICA taxes covers a diminishing proportion of the amount paid out. No particular point is anymore critical than another; the net contribution of Social Security (FICA taxes minus payouts) goes steadily down, from something positive in the past to something negative in the future. The point where the net contribution passes through zero (apparently in 2009 from your report) means no more than the point that the thermometer passes upward through 100 degrees Farenheit to the soon to be boiled frog.

Deflation - The midwife of hyperinflation.

I thought water boils at 100 degrees C?;)

[El Aramus]

Re: SS Trust Fund DIED in 2009

Multiply C x 1.8 then add 32 and you get F. (212 degrees)

[ThePythonicCow]

Re: SS Trust Fund DIED in 2009

I thought water boils at 100 degrees C?;)

That is correct. I stated 100 degrees F knowing it did not mark any significant phase change point for water at one atmosphere pressure.

Deflation - The midwife of hyperinflation.

I may have lost ya', sorry. I see tax revenues down (in both nominal dollars and real gold value ,) government expenses up (again, either way you measure it,) and hence government fiat money destined to become worth quite a bit less. Is that what you're referring to?

I tend to avoid using the terms "inflation" or "deflation" in unqualified context. I prefer to be explicit as to which items price I'm talking about, in which monetary unit.

[jtabeb]

Re: SS Trust Fund DIED in 2009

That is correct. I stated 100 degrees F knowing it did not mark any significant phase change point for water at one atmosphere pressure.

I may have lost ya', sorry. I see tax revenues down (in both nominal dollars and real gold value ,) government expenses up (again, either way you measure it,) and hence government fiat money destined to become worth quite a bit less. Is that what you're referring to?

I tend to avoid using the terms "inflation" or "deflation" in unqualified context. I prefer to be explicit as to which items price I'm talking about, in which monetary unit.

Okay, paper dollars will be worth more as toilet paper that as a medium of exchange for real goods and services.

Is that qualified enough?

[ThePythonicCow]

Re: SS Trust Fund DIED in 2009

Okay, paper dollars will be worth more as toilet paper that as a medium of exchange for real goods and services.

Is that qualified enough?

Yup.

Or as I put it, paper dollars will be worth more -before- they print that nice artwork on them than after. The paper used for dollars is high quality and would make good toilet paper plain, but that ink is kinda' scratchy.

[mmr]

Re: SS Trust Fund DIED in 2009

They might also be useful as kindling, although I haven't tested that out yet.

As a practical matter, all this means is that the Fed will have to step up its quantitative easing to another level to buy the Treasuries that the "excess" social security tax receipts used to fund.

I would think that Congress will eliminate the income cap on social security taxes this year to buy more time (among all the other tax hikes coming).

Also watch out for new "liquidity requirements" for banks that will effectively force them to use your deposits to buy Treasuries rather than making loans. Don't worry though, your deposits will still be guaranteed by the FDIC, which is effectively backed by those same highly secure Treasury bonds.

[thriftyandboringinohio]

Re: SS Trust Fund DIED in 2009

Now look at the reports released today. Total tax receipts were less than the disbursements. This was not supposed to happen until 2016. It happened last year.

You make a great point about the sudden decline in the SS trust fund, regardless of the fact it was doomed all along. I've seen analysis that point out how the current crises stresses Social Security. When unemployment surges and stays, it hits SS twice. Firstly, fund income is reduced because of lower payroll taxes. Secondly, people who planned on working until age 65 or 70 or 72 find themselves unemployed without hope at age 59 or 60 or 61. Desperate, they sign up for early-but-reduced Social Security benefits. Income down, payout up.

[ThePythonicCow]

Re: SS Trust Fund DIED in 2009

You make a great point about the sudden decline in the SS trust fund, regardless of the fact it was doomed all along. I've seen analysis that point out how the current crises stresses Social Security. When unemployment surges and stays, it hits SS twice. Firstly, fund income is reduced because of lower payroll taxes. Secondly, people who planned on working until age 65 or 70 or 72 find themselves unemployed without hope at age 59 or 60 or 61. Desperate, they sign up for early-but-reduced Social Security benefits. Income down, payout up.

One cannot sign up for Social Security until one is 62. Well, to be precise, one can sign up a few months before turning 62, for payments to start the end of the first full month after one turns 62.

I would recommend that anyone over 62 who is not earning much otherwise to sign up -- get it while the gettin' is good.

If one estimates one's own life expectancy to be less than the actuary tables, then one should sign up earlier rather than later even if one expects the government to reliably payout properly inflation adjusted payments for the rest of one's life. Any unspent money you collected before you die you get to pass to your heirs; any money left on the table stays with the government, of course.

If one estimates one's own life expectancy to be greater than the actuary tables, then one can still sign up early and if the money is not needed, bank it and each year Reapply for Social Security. To do this, you give back what you received and restart payments at the higher level for your now greater age. If you "knew" you were going to live to be a hundred, and you "knew" the government was good for these payments, you would win by starting payments as late as possible (age 70, I believe), by reapplying then if appropriate and able.

But if you don't think that the government will continue to reliably pay Social Security, fully inflation adjusted, for the rest of your life, then I say "get it while you can!"

Another complication would be income taxes; better to receive Social Security in years of otherwise low earnings. If one takes it early, stashes it, reapplies and takes it again, all the while receiving good income from other sources, I suspect one ends up paying more income taxes on these Social Security payments than is optimal. Perhaps one can amend one's return after a reapplication to remove that income now returned; I don't know.

One advantage of applying early with the intention to reapply if one didn't need the money is that this puts the money in your hands, not the governments. Say I learn a year from now that I have six months to live due to some horrible disease. I can take the money I collected so far (that I had expected to return on a reapplication(*)) and instead put it to good use for my medical expenses, my last few months of fun, or passing on to my heirs. If I had not applied in the first place, I'd never see that money.

In other words, a dollar in hand is worth two in the Fed (and neither is worth a plug nickel compared to an ounce of gold .)

By the way, thriftyandboringinohio, I agree with your primary point. Hard times mean that the government pays out more, sooner, for Social Security and collects less. "Income down, payout up" as you say.

(*) Well, actually, unless my confidence in the government increases, I don't expect to reapply. I'm getting the dollars as soon as I can and putting them into durable stuff I will have good use for over the next few decades and gold.

[Rajiv]

Re: SS Trust Fund DIED in 2009

Regarding early retirement and Social Security

from - Early Retirement - Some Rules of the Road

Rule #6: Be aware of the effects early retirement may have on Social Security benefits. If you are under age 65 and continue working after you begin collecting Social Security benefits, you may have to "give back" a portion of your benefits. In other words, your Social Security benefits may be reduced once your earnings exceed a certain income cap. If you continue working after you begin collecting Social Security, a portion of your Social Security benefits might be taxed. The calculation to determine how much of your benefits will be included in your gross taxable income is somewhat complicated. For more information, contact the Social Security Administration.

Rule #7: Taking an early retirement on your own may not make sense if the specter of corporate downsizing looms. Is there a chance your company will lay you off if you do not elect to leave on your own? Many companies now lay off high earners as part of their cost-cutting measures. If your company is experiencing financial difficulties and downsizing appears imminent, you may get a better deal by waiting a little while for a “forced” early retirement with a company severance package.

[jtabeb]

Re: SS Trust Fund DIED in 2009

Yup.

Or as I put it, paper dollars will be worth more -before- they print that nice artwork on them than after. The paper used for dollars is high quality and would make good toilet paper plain, but that ink is kinda' scratchy.

Cow, You got a piece of land that I can park an RV on, in say, 6 months?:eek:

[c1ue]

Re: SS Trust Fund DIED in 2009

Okay, paper dollars will be worth more as toilet paper that as a medium of exchange for real goods and services.

To paraphrase an old and racist joke: this toilet paper don't take no s**t off no injun. Dollars don't wipe well... :eek:

Think about it - one reason people use brand new $100 bills for snorting is that they don't suck up much residue in the process!

I would recommend that anyone over 62 who is not earning much otherwise to sign up -- get it while the gettin' is good.

In general your suggestions are worthy of thought.

I would caution you to consider another possibility: that the government will offer some type of reduced up front lump sum payment. This seems improbable given that the cash expenditure short term is greater, but in the context of QE is not improbable. I would expect any such settlement to be actuarially a ripoff, but in the context of looming inflation/hyperinflation it might be worthwhile.

After all, corporations do it

[ASH]

Re: SS Trust Fund DIED in 2009

From ZH, looks like SS will have no cushion at the end of this year! (As in the trust fund will be gone!)

Not to put too fine a point on it, but technically, the trust fund will not be gone; net payments into the trust fund -- and the associated captive demand for GAS bonds to help pay for general fund deficit spending -- will be at an end unless payroll tax revenue rises faster than Social Security payments. Would that the trust fund was actually gone! It still exists as a liability for the general fund -- worsening the government's cash flow problems rather than helping them, as before.

If there's some magical rapid recovery in employment (or, as suggested by others, an end to the income cap on payroll tax), then this could reverse again. Still, the turning point where the entitlement programs switch from helping fund general deficit spending (through 'saving' excess payroll tax) to being a burden on the general fund is my personal horseman of the fiscal apocalypse.

[rjwjr]

Re: SS Trust Fund DIED in 2009

Not to put too fine a point on it, but technically, the trust fund will not be gone; net payments into the trust fund -- and the associated captive demand for GAS bonds to help pay for general fund deficit spending -- will be at an end unless payroll tax revenue rises faster than Social Security payments. Would that the trust fund was actually gone! It still exists as a liability for the general fund -- worsening the government's cash flow problems rather than helping them, as before.

If there's some magical rapid recovery in employment (or, as suggested by others, an end to the income cap on payroll tax), then this could reverse again. Still, the turning point where the entitlement programs switch from helping fund general deficit spending (through 'saving' excess payroll tax) to being a burden on the general fund is my personal horseman of the fiscal apocalypse.

But, but the inventor of the internet, Nobel recipient, and savior of the planet promised that the money was safe...



I guess he never expected what was to come...