Social security won’t be around long enough for me to collect it

Seems like it would be a good idea to invest some time doing issue education to millenials on raising the Social Security cap to extend the fund through 2044, at which point we will be in striking distance of retirement…

I will get no benefits whatsoever is a very extreme position. Are Americans really that pessimistic? Ill never get a return that can match tips, that one would already be less crazy. Now move back to the 1990ths stock market and the widespread asumption that it is normal for stocks to return 15% and that there is no risk in them. In such an environment, it is understandable that social security looked like a horrible deal for many.

I don’t particularly believe it will be the case for those so lucky enough to be workers because I believe that this era is a slow motion crisis/meltdown. Between the worldwide economic demand crisis (effectively because disempowerment of normal people rather than no cash, precisely) and global climate change, I expect that world governance tendencies will be changing by the end of the 2020s. Of course, people my age could possibly get SS, but I strongly doubt Millenials will.

To add on to the comments so far – I think there’s a number of questions at work here regarding this belief.

1) Why?
2) Given that why, is it likely?

I might believe that by the time I retire, the right wing will have dismantled it. I think that belief has reasonable odds.

Looking at my own mother’s pension situation in the UK, one can also believe reasonably that there’s a mismatch between the way these things are designed and the inflation environments involved. Is £X, which is enough to live on now, still enough in 10 years time – let alone Y years time when I get to retirement age?

(For any work ethic moralists out there, I have no desire to stop working, but one must be realistic about the way job market views older people…)

However, as noted, media narratives have concentrated on the “it will be bankrupt” meme – which seems the least likely to actually occur…

John, thanks for spelling this out. It’s one I hear all the time and attempt to counter, but it’s so hard to effectively counter cynicism like this (dismissing positive arguments being what cynicism’s all about). It’s nice to have a simple deployable push back like this.

You called? (I was born in ’52.)

FWIW, when I was in my teens and early 20s, it wasn’t clear that my generation would make it 30, let alone 62. (Given the draft, worrying about what one would be doing after 30 wasn’t something that made much sense in those days.) In those days, 30 was seen as old. “When I’m 64” was proof positive that the Beatles were on LSD. So expecting Social Security to be there was far from my thoughts. I was also quite unconcerned with health insurance, assuming that the universities I was at (I managed to remain an on-financial-support grad student until 32.) would have medical facilities. Those assumptions were probably quite wrong…

Nowadays, though, given how the Republicans hate Social Security, I’m not sure assuming it’s going to be there is a good idea. Even people who really should know better talk about the government’s repaying the loans (i.e. paying the interest on, and paying off as they come due, the SS trust funds government bonds) it has taken out from the SS trust fund as the “cost” of SS. That is, it looks to me that the Republicans _intend_ to default on the (US government) bonds the SS system is forced to save it’s trust fund as. So not seeing SS as a 100% guaranteed thing may not be all that dumb or even odd.

On paper at least, the SS system is doing really well: it’ll be in the black for another 35 years or so even without raising the cap on the payroll taxes. But that “on paper” bit assumes that the Republicans don’t take over the government and default on the SS trust fund’s bonds. This bit that the Republicans think it a good idea for the US government to default on its debts is new and disturbing.

Oh, yes. By the way, Japan’s current ratio of elderly to working age population is higher than that ratio will ever be in the US, so the idea that the US is facing some sort of demographics disaster is completely silly.

I agree with your sentiment but 20 years from now there will be no social security because the global economy will have collapsed. Another financial disaster, like 2008’s, or food shortages because of climate change, or massive resource wars between countries with nuclear capability, or a big methane burp that rapidly raises the temps causing havoc in lower lying areas, or all of these things will have happened by then. SS will no longer matter. We’ll all be fighting for our survival.

“And that’s the rub…when even ‘your side’ isn’t on your side, it’s hard to be optimistic.”

Very well put.

I might believe that by the time I retire, the right wing will have dismantled it. I think that belief has reasonable odds.

Their previous efforts to do so have been a spectacular failure. In 2005, they had an enthusiastic president, both houses of congress, a compliant press and plenty of squishy deficit hawks in the minority party seemingly ready to give them bipartisan cover. They didn’t come remotely close to accomplishing their plan. In order to think it’s likely for such a plan to be more successful, you need to imagine a set of circumstances considerably more fortuitous to the goal of dismantling social security than that moment. I suppose such a thing is possible, but political and demographic developments since 2005 have been moving squarely in the other direction, and the coming 401K disaster is going to make SS all the more important to more people, intensifying support for it. I can’t see a good reason to think a moment considerably more conducive than 2005 for SS destruction has ‘reasonable odds’ of emerging.

That would be me, and here I am knocking it down. It had nothing to do with David Stockman; I was born in 1945 and in the ’60’s it seemed perfectly obvious to me and my friends that we were living through the last days of Western Civilization. Nothing has surprised me more than the longevity of this decrepit modernist hulk. I used to think it just takes a long time for a Dinosaur to bleed to death, but it turns out that the global afterburners have lit up and wherever we are going, we are getting there faster than ever before. Personally, I’m still looking forward to whatever comes next. Trying to build up some appropriate means of production against the day.

There is a widespread desire to make the plot line of history congruent with an individual’s lifespan. Thus decline and fall are widely predicted by those entering their final decades. But the long-wave cycles of history have no phase relationship with individual life cycles. British cities were choking on toxic levels of pollution from coal burning in the 1950s. American cities suffered race riots in the 1960s. The world was on the brink of nuclear war for decades and still faces that risk. Yet civilization advances, and the carnage of warfare diminishes.

Even the worst scenarios for global warming will leave a remnant human population that will continue to advance. We may even be able to avoid repeating obvious past mistakes. There is no rational case for despair, but that won’t prevent people who seek despair from finding it.

Could we stop talking about global disaster instead of social security, please? Maybe humanity won’t make it…but we’ve made it so far, and we’ve done so because of hope from unexpected places. Let’s go back to making policy as though we can make policy, instead of paralyzing ourselves with fear.

@23 and @24: Thank you. It’s nice to know I’m not the only one who wishes this comment section weren’t so frequently used to host impromptu competitions for “most hopeless and bleak expression of despair” with little regard for the actual subject at hand.

@26

Oh, I’ve never heard that argument before. I’m convinced.

Watson

Social security also has disability insurance, survivors insurance, longevity insurance and redistribution which need to be taken into account. From an individual perspective, you may not want to pay for redistribution, but in the absence of social security you may need to pay extra taxes to provide it. How good an investment you think social security is also depends on where you are in the income distribution and your age. Also switching from Social Security to individual accounts has potentially very high transition costs – unless you plan to completely stop paying social security taxes to support current recipients,

JQ:

I haven’t followed this thread, (since it seems so obvious), but isn’t it enough just to state that SSA is a universal annuitization scheme, which the selective mechanisms of “private” markets would never achieve, with a “private” default risk eliminated, and at a transaction cost that is remarkably low? (And further, the alleged problems are, aside from the fact that the “combined budget” has allowed looting by tax cuts for the rich, due to the fact that the Greenspan Commission, relying on then historical data, assumed the “trust fund” would accumulate 90% of earned income, rather than, as it turned out 85%, and that, further, removing the cap entirely, would allow for not just eliminating any shortfall, but expanding the program, to deal with the loss of “private” pensions and personal savings?)

One often reads, or hears, of odd poll results.
I respectfully submit that most people havn’t really thought *hard* about things like this – I mean, how many people have the energy, math skills and political interest to think about this ? Let along young people.

one might ask, with all the public intellectuals giving the lie to D Brooks, why doesn’t the author of the original post, or one of the commenters, link to the authoritative, clear, simple website liberalfacts.com, which has a clear, simple explanation of soc sec ???
including something i’ve never understood, the loaning to the gov and repay of soc sec money – I understand that as we draw down the trust fund, the gov’t will exchange ious from the soc sec trustfund for other IOUs, but I still don’t get how that whole thing…

Well I’ve been one of those confortably above the FICA limit, and like many here am 62. Depending upon when I start taking benefits they will be around or above $3K per month. Like most people at my income level I will have other income streams arising from retirement programs, -I am not complaining. Sure a scheme that didn’t try to redistribute downwards would have netted me even more, but that would be just greedy of me to feel cheated. As it is I expect to have all the income I need in retirement without dipping into investment prinicple, the kids can get that when the day comes. People in the top 5-10% have no reason to complain.

Omega Centuri: The problem isn’t the redistribution, it’s the low returns. Because you are over the FICA cap, this hurts you less then someone under it. The redistributive effect of social security is extremely complicated, because the years of life remaining have a major impact on the value of benefits. However, even if the money was still redistributed the same way, the low returns hurt everyone.

Layman, I support mandatory savings schemes. I don’t see why a retirement savings scheme can’t, in combination with income redistribution, achieve the same goal more efficiently in terms of percentage of income devoted to it. The problem is particularly acute when capital gains at the expense of labor: at the moment saving should be cheaper, social security gets more expensive.

Since no in the thread has mentioned it, I’ll add that the financial industry and popular financial advisers propagandize to young people to expect SSI to disappear. One of the the first things you’re told when you try to grow up and plan for retirement (it happened to me 20 years ago, and I still see it repeated constantly) is to ignore possible SSI, because who knows, right? Now, obviously, young people don’t take advice, so this isn’t a perfect transmission mechanism, but “everybody knows” it’s the “smart” way to look at things. I personally think it’s nuts, and I think any real threat to SSI would make younger voters how much *they* rely on SSI to take care of their parents, but I’m no poli sci expert.

#3 – yes indeed, educated, politically liberal, and activist young people do not believe social security will be there for them. Even middle aged people don’t believe it. A 40-something once told me that “of course Social Security is a Ponzi scheme” and the whole lunch table of 30 to 40 year olds nodded in agreement.

Watson @ 44

So, in fact, you agree that society should guarantee a minimum standard of living to the elderly, and you agree it should be funded by income transfers. What was your objection to Social Security again?

It takes 12% of everyone’s income, then sends it to retirees, with largely little regard to how much those retirees or those taxed actually have or need the money. That’s not a good system for a safety net to insure the elderly don’t die of starvation.

Yes it is. It is simple, easily applied, and popular enough to survive decades of assaults on it.

Someone born in 1952, who entered the workforce in 1977 at the age of 25, would now be turning 62 and eligible to collect Social Security.

Those stereotypical someones (if white) would likely have had parents who benefitted from the GI Bill, for instance through subsidised mortgages to move out to the Levittown of their choosing, would themselves have benefitted from a relatively cheap college education, then had the chance to vote for Reagan and Bushes to keep taxes low through large chunk of their working lives, and now complain that young people are lazy and entitled, while watching Fox News.

That’s a fairly singular generational pathway.

Also, just seconding (fourthing?) @23–25.

I’m 62 too!

The expectation of imminent catastrophe is a surprisingly durable tradition; indeed, it’s one of the founding beliefs of Christianity. It pervades the New Testament, and the experience of two thousand years has done little to temper it.

I can remember being a ten year old astronomy enthusiast despairing of ever seeing the return of Halley’s Comet or the year 2000. The span of time I faced was dauntingly immense, so I can understand people who don’t think Social Security will exist by the time they retire. They’re childish.

My father died at my age, and, as one might imagine, was not very happy about it. Back then I thought he was pretty old. Now, not so much.

The dirty secret of those who wish to abolish Social Security is that they think financial predation is a healthy and natural part of society. The fleecing of ignorant or otherwise incompetent people to concentrate wealth in the hands of the clever and ruthless is how they wish the world to be. Unleashing the wolves of Wall Street on the retirement savings of the masses is exactly what they want to see.

@56

Then I misunderstood you. Sorry, but this would be easier if you just made clear statements like ‘I don’t believe society should guarantee a minimum standard of living for the elderly’, if that’s in fact what you mean. A mandatory savings plan doesn’t meet that objective – that’s the objection to it.

My father died at my age, and, as one might imagine, was not very happy about it. Back then I thought he was pretty old. Now, not so much.

Unless your father was a very old father, his life expectancy, once he made it over 50, was probably only a few years less than yours.

John Quiggin 03.23.14 at 9:44 pm

” Watson is making stuff up, as usual. To start with the obvious snark, the return *guaranteed* by a mutual fund is zero, so on his calculation, Social Security is infinitely better, as long as Congress doesn’t take his advice and repudiate its obligations.”

Regarding the last clause: if this were to happen, it’d be the result of a political – not just realignment, but a revolution in American politics, which would make the Reagan Revolution look like a triviality. At that point, the safety and growth of any private savings is also in jeopardy.

Watson, giving social security to every senior is a poltical compromise aimed at making the program hard to kill. It seems to have worked, since the program has survived 30 years of conservative efforts to kill it.

That aside, I’m really not trying to play a game with you. I’m mystified by two things – first, your need to compare SS with retirement savings / investment programs, when you seem to understand quite well that it is not such a program; and second, your willingness to support income transfers to the needy while decrying Social Security, which is at its core a program transferring income to the needy.

But I’ll say no more, as I don’t expect agreement to suddenly erupt here.

Nick s @ 49

ROFL! That’s me, almost exactly (well, except for the politics). My father grew up poor in NYC (immigrant, but WASP, parents), and leveraged the GI Bill to an engineering degree. He turned 30 living in a GI Bill loan financed house on Beacon Hill (!!!), with a DAR wife and space cadet kid. (Said kid, on the other hand, turned 40 living in a one room apartment in Tokyo. Oops.)

Although I talk the pro-SS line, having worked outside the US most of my life, I’m not even vested in SS/Medicare yet. It looks, though, that at the point I retire, I should have 12 years or so of SS contributions, and that will probably give me more income than the 25 years I contributed to the Japanese SS-like system. Maybe. So I’m dependent on the US banks holding my life savings not losing them. The possibilities for disaster are near infinite. I’d be better off if I had stayed freelance and spent those 20 years I worked in-house contributing to both systems. Oops, again. On the other hand, I wouldn’t have said life savings if I had kicked in almost 20% of gross income to the SS system.

But having been born into a WASP middle class family at the optimal place and point in human history, I’ve been able to do whatever I please with almost no adverse effects for all of my 60 odd years. (Even the funky one-room turned into a comfy three-room when we renovated the building 2 years later.)

JQ @30: @23-25 I agree. Let’s leave the inevitable doom facing the planet to another thread (I might even post on it) and proceed on the assumption that retirement income is worth worrying about.

I thought the OP topic was irrational anxiety about receiving SS benefits in the future, which being widespread is likely to impact the future availability of SS benefits. Whether the anxiety is rational or not, its persistent existence is empirical. If not rational, then all the more likely to be solved through sociology (or something) rather than economics education, although good economics will surely be useful. So a legitimate question maybe, is this just the normal excess discounting of the future that humans do? Or is it related to the projection of systemic terror Corey was on about?

@64

If you view the S&L looting, the dot.com collapse, and the 2008 mortgage meltdown as irrelevant distractions, then you would have ample faith in the superiority of Wall Street managed retirement over Social Security. Are you really so naive?

Social Security protects ignorant, poorly-informed, and semi-senile people from victimization by financial predators. You propose regulation of private sector retirement plans to provide similar protections. Such a regulatory apparatus would be easily manipulated and bypassed by Wall Street. The argument of superior private sector investment efficiency opposed to the stewardship of Social Security is implausible because of repeated major failures of trust in the private investment sector over the last 20 years.

Straightwood 03.24.14 at 6:23 pm

” @64

If you view the S&L looting, the dot.com collapse, and the 2008 mortgage meltdown as irrelevant distractions, then you would have ample faith in the superiority of Wall Street managed retirement over Social Security. Are you really so naive? ”

It amazes me. It never ceases to amaze me. Social Security has been going on, and on and on, while Wall St gives us catastrophe after catastrophe. And these people don’t just invest (which I do), but seek to put *every single egg* in that basket.

mud man: “So a legitimate question maybe, is this just the normal excess discounting of the future that humans do? Or is it related to the projection of systemic terror Corey was on about?”

Probably both, but I believe that it’s the result of decades of well-funded and ideologically-driven propaganda. I recall Gore saying that if hundreds of billions of $$$ rode on whether or not mankind had actually walked on the Moon, that would still be ‘controversial’. And it’s been pointed out that the same people who talk about Social Security ‘shortfalls’, and ‘undfunded liabilities’ don’t apply that accounting to most other governmental and private things (e.g., what is the ‘unfunded liability’ of the US Department of Defense?).

Barry: Actually, I know of funds with 0.09% expense ratio and no front-end load. Anyone can buy them: minimum investment $3,000. Front-end loads are vanishing, as more people realise active management isn’t worth it. Furthermore, you can avoid the expensive ones, and so do better then the mean. You can’t avoid the expense of social security.

Even better, that same source says the average target date fund costs .67%. So Social Security is more expensive then what most people would replace it with. Computerisation has massively reduced mutual fund expenses as well as Social Security administration. But this isn’t a fair comparison, because the insurance functions require more administration, and returns net of fees are more important then the fees themselves. (A T-bill fund with 0.05% expense ratio is worthless)

Lastly, social security has not been going on and on. Benefits have been cut and taxes raised since the 1960s. Even the supporters call for more cuts and more taxes. This is hardly the model of a sustainable system. Remember 6% FICA? Lump-sum payments in case of premature death?

You asked a technical question about unfunded liabilities, and why the DoD doesn’t count. One answer is that because Congress can not pay the DoD or Social Security any given year (except retirement benefits, which are funded in the Federal Retirement System) they are not actually liabilities. To the extent that you consider this unlikely you should add the incurred benefits to the Federal debt. However, Congress has cut benefits to preserve the ability to pay before, so I don’t think the unfunded liability line is accurate. Empty promises is much more descriptive. “We’ll pay, if we want”.

Feed the poor, eat the rich.

The problems of Social Security are the problems of a country in which the plutocrats are taking an unconscionable share of income. They do that by disinvesting. Cashing out and predatory financial schemes. So, the idea that there’s some alternative investment strategy for median Mrs. Everyman’s retirement is utter nonsense. Mrs. Everyman’s savings is Mr. Plutocrat’s loot. Freeing the hoi polloi from Social Security is just a method to make even more of their income and paltry wealth available for upward re-distribution. The idea that Mrs Everyman is going to be able to invest for return is just crazy. She is the return on investment.

Social Security is not an investment program. It is the safety net.

Bruce #77 old friend, I was just thinking that, to all the stuff you’ve written about this over the years, we can now add the macroeconomic specter of a savings glut, zero interest rates, lack of consumer demand, and “secular stagnation”. Thus, in addition to the immoral political economy of neoliberal privatization schemes, taking more money out of the real economy to put more in the private financial system would be just about the Stupidest Macroeconomic Idea Ever. (Although there are several out there in competition for that title.) It would cause more stagnation. Social Security has been a huge fiscal stabilizer in this downturn.

Social Security is not wildly expensive. The Wall Street crash was wildly expensive.

It doesn’t “take from the poor and give to the rich”. It takes from everybody starting at the beginning of their work life, and pays out to everybody at the beginning of retirement. The pay-out is mildly progressive. By including everybody regardless of need, it avoids moral hazard and the need for a big means-testing bureaucracy. It is almost the perfect design for a safety net.

Before the financial crash, 1/2 of retirees would have been below the poverty line without Social Security. The fraction is probably larger now. So Social Security is also an anti-poverty program. One that you work to receive, thus avoiding free-riding, so that’s a good thing.

The fact that many people now need it, is not Social Security’s fault. The underlying supposition there is that the amount of money allocated to each person (the distribution of income) is correlated to their worth to the economy (thus the sneer about “laziness and procrastination”). That supposition is false, due to things like market failure, capital-biased technological change, and financialization of the economy — and even some economists who aren’t intellectually corrupt will tell you so.

Social Security takes care of a multitude of sins beyond enumeration. Go worry about something else.

John, to respond to your top post: As you may know, hundreds of millions of dollars have been spent in the U.S. over the last few decades in a coordinated campaign that is targeted at high school and college kids under titles like “Fix the Debt”, in order to inculcate fear of government spending and fear about the viability of Social Security. But most Millenials probably also learn from their parents and elders that Social Security is a good thing, and that some of these fear-mongers are financial crooks. So that would account for the unusual results in the polls. But I don’t have much hope for a better economic understanding 20 years from now, given how dismal it is now. Just go right on up the economics ladder past the Wall Street traders through some economics Nobelists to the highest policymakers during this economic crisis, even look at some current statements from the Board of Governors of the Federal Reserve. The amount of intellectual incompetence among people who should know better, or perhaps it is the extent of subjugation of their intellectual honesty to the hard-money social cognitive bias of the plutocracy, always astonishes me. It is inept. So I am not sure that the relatively untutored will know much better, even in 20 years.

Watson ” To the extent that you consider this unlikely you should add the incurred benefits to the Federal debt.”

Layman: “Yes all future liabilities for all things should be paid for now. Thus we’re all broke. Film at 11.”

Except for whatever the right wants; we can always afford that.

“The failure, if there is one, is that an age 65 retirement when people lived to 70 allowed for a far shorter average retirement than people currently enjoy today with longer life expectancies.”

That turns out to not be a problem, actually. First of all, life expectancy at birth (which most people think of as life expectancy) is a very different number from life expectancy at 65 (the latter has gone up only by about one half as much since 1960). Much of the gains in life expectancy in the 20th century were due to reduced infant mortality rates. But most significantly, if you look at life expectancy at 65 by wealth, you find that working class stiffs aren’t living significantly longer than they ever did; it’s only rich folks who are living longer.

So Social Security’s job isn’t getting anywhere near as much harder as most people think. It’d be financially sound forever with some very minor adjustments, e.g. eliminating the income cap and means testing.

#88 – “it is quite possible to look at the sum of the expected future inflows and sum of future outflows and forecast that there will be a deficit.”

Yes, if you are willing to believe that the sum of future inflows can be estimated with sufficient accuracy 20 or 30 out. And even then, the deficit that is forecast is not large and can be handled with minor adjustments 10 or 15 years from now.

“an age 65 retirement when people lived to 70 allowed for a far shorter average retirement than people currently enjoy today with longer life expectancies.”

This is a widely held but false belief about the cause of the forecast deficit. First of all, the retirement age has been raised to 67 (people somehow haven’t noticed this). Second, life expectancy at 65 has never been five years Most of the increase in life expectancy In 1940, the average 65-year old man could expect to live to be 77, and a woman could expect to live to be 79. http://www.ssa.gov/history/lifeexpect.html Social Security was always intended to pay for more than a decade of benefits.

Yes, people live longer and there are fewer workers per retiree. But these actuarial changes were understood perfectly well when Social Security was reformed under Reagan in 1983. All the arguments you hear – we live longer, too many baby boomers, fewer workers per retiree – these were accounted for in the 1983 SS tax increase.

So why do we have a shortfall now? The main reason is increasing income inequality. The actuaries assumed that the distribution of income would remain roughly the same as total income increased, thus putting more workers up near the top of the cap and fewer toward the bottom. This hasn’t happened – more workers are at the bottom, much more income escapes SS taxation entirely, and thus the cross-subsidy built into the system is more expensive than forecast. You could cut half the projected shortfall simply by raising the salary cap to capture the same percentage of income that the cap was designed to capture.

http://thinkprogress.org/economy/2012/07/17/532621/how-income-inequality-has-damaged-social-security/

Oh, and you also hear (and see scary charts) that the SS trust fund has moved from growing to shrinking – more money out than in. But this is an intended result of the 1983 reform.

Think of Social Security as a big tub. A stream of income (SS taxes) pours money into the tub, and benefits flow out the bottom. When SS was established, it was decided to keep a few inches in the bottom of the tub to make sure that in the event of temporary reductions in flow (e.g., recessions), benefits would continue to be paid. This is the trust fund. But mainly the system was designed to be pay-as-you-go – current workers pay for current retirees.

Then the baby boom happened, and the actuaries saw by the late ’70’s that there would be a lot of retirees all at once, too many for pay-as-you-go. How to pay for them? The idea was to increase taxes much more than needed to pay current retirees, and tub would fill up. Baby boomers would pay for current retirees, and would also save for their own retirements.

So the tub filled up for twenty years. Now the boomers are retiring, and the tub will drain for 20 years back down to just a few inches in the bottom, the baby boomers will eventually all die, and things will go back to pay-as-you-go.

This is supposed to happen. It’s the plan. The shouting that the system is suddenly paying out more than it takes in, as if it were some kind of disaster, is demagoging by people who hate SS and want to get rid of it. (Oh, and who want to steal the money in the tub – that’s the main reason for all the SS hate.)

@92

The mechanism seems straight-forward. If more income accrues to those above the cap, that income escapes the tax; so program revenues fall below the forecast curve, while payments are largely unaffected. Eliminating the cap solves that problem though of course the growing inequality fuels a lot of other problems as well.

#94 – “the ponzi scheme”
Jesus H. Christ on a motorcycle, it’s not a Ponzi scheme.

Look, Social Security is funded by a tax on productive work. As long as people are working and earning, there will be an income stream to fund it. The tax may be higher than needed to pay 100% of current benefits (as it has been for the last 20 years) so a surplus builds up. Or, it may be lower than needed to pay 100% of promised benefits, but still enough to pay 75% or 80% forever. That is predicted to happen in 20 years’ time, and if the projections are right either the promised increases in benefits will have to be cut somewhat or the tax will have to be increased somewhat.

But as long as there is a United States of America, there is a rock-solid source of funding for Social Security.

There’s no smoke and mirrors here. You’re not being lied to about where the money is coming from. There’s no possibility of a collapse of income due to a failure of confidence. It’s not Ponzi, it’s not Madoff, and the people who have convinced you that it is are evil fucks who want to steal your right to the money that is still in the tub.

I dont see why young peoples beliefs about social security are considered a problem, it seems to me the millenials have been paying attention.
They dont want ss to be cut because its a very good thing, and they know that if it is cut now it is less likely to be there when they retire.
They think it wont be there for them because one of the 2 major parties is determined to get rid of it.
These opinions are good, it means the kids know that the Republicans are determined to get rid of something that the millenials want to keep. This fear should translate into electoral success for liberals and left wing solutions over the long term.

Cian: “It has, but I think the point is life expectancy increased more for rich, white, hetro peoples than non^3. Smoking is still much high among poor, non-white, non-hetero populations, hence they don’t receive the same value from their SS taxes.”

This has been covered by Krugman, as well.

Barry: Actually one way of looking at any retirement scheme (including 401Ks and other neoliberal wet dreams) is that they are a claim on a certain proportion of today’s GDP by the retired. A 401K is no different from social security. You can’t save for the future in any real sense. Society doesn’t have to honor your ‘ownership’ of stocks/bonds any more than it has to honor social security. It’s all make believe at the end of the day.

#99 – “They think it wont be there for them because one of the 2 major parties is determined to get rid of it.”

But that’s NOT why think it won’t be there. They think it’s a sham, a Ponzi scheme, a house of cards that will collapse of its own weight. I have talked to millenials and to a person they believe that the FICA tax is just money thrown down the sewer – they expect to get nothing for it. It’s nice for mom and grandma but it will never help them. And they say this with the calm lack of concern about the future that comes from being 25.

The Republicans know this – they know that when they say, “Social Security will be guaranteed for everyone over 55,” they may be causing some worry for 40-55 year old voters, but younger ones have already written off Social Security so their votes won’t be affected. And they know that when Dems say, we will save Social Security for future generations, the younger voters don’t believe them. It’s not anyone’s fault, they think, it’s just that the system is unworkable.

It’s a really serious problem, and I don’t see the Dems doing much about it.

pensions died because pre-ERISA the unions were too stupid to understand the actual cost

No. Pensions died because of legislation passed in the 1980s severely penalizing over-funded pensions with a 50% excise tax (line 2 of Form 5330). So pensions could not save for rainy days, and when times were tough, many companies couldn’t afford to make up the difference. In addition, too many corporate raiders used pension funds to repay the costs of taking over the company, so the Ivan Boeskies and Mitt Romneys of the world could get richer (my current employer went private due to Bain).

When 401k plans were created in the 70s, they were only being offered as supplements to existing pensions. Over time, as companies abandoned pensions, all that remains are 401k plans. They weren’t intended to be your retirement savings, they were intended to give highly compensated employees extra gravy. It wasn’t until the late 80s that 401k plans had to be opened up to all employees. It wasn’t until the 90s until you could contribute to an IRA while being covered by a pension/401k at work.

If you haven’t seen a mutual fund with a 2% load, then you haven’t looked far. This page lists a dozen funds with loads over 2%.
http://www.cnbc.com/id/100746205

I work in the pension industry.

“working class white women have declining life expectancy”

I have seen reports of studies about this, and I am skeptical. Not that they’re incorrect but that they don’t seem completely reliable.

One study finds that white men and women without a high school diploma have shown a decline in life expectancy. It’s from a researcher named Olshansky at the University of Illinois-Chicago.

http://www.chicagomag.com/Chicago-Magazine/The-312/September-2012/Why-Are-Lifespans-Among-Low-Education-Whites-Declining/

See the comments to this article, in which a questioner asks whether we’re seeing a selection effect: half a century ago, plenty of well-adjusted, healthy people didn’t graduate from high school, but over time, more and more did, increasing the fraction of non-graduates who have a problem that would affect life expectancy — either health- or behavior-related. And the study’s author answers, but not satisfactorily – he limits his comment to the change in graduation rates between 1980 and 2008. To be fair, this is what the questioner asked, but the author should have understood the question more broadly and it seems to me he might have been dodging the issue.

Another study (or studies, from the same data set) shows that women in poor rural counties have shown a decline in life expectancy.

http://www.nytimes.com/2014/03/16/business/income-gap-meet-the-longevity-gap.html?_r=0

http://www.theatlantic.com/health/archive/2013/10/us-women-are-dying-younger-than-their-mothers-and-no-one-knows-why/280259/

The problem with these county studies is that many poor rural counties have experienced significant depopulation in recent decades. If the emigrants are disproportionately healthy and non-self-destructive (as seems likely), then by removing themselves from the population they have decreased the county’s life expectancy.

But if white working women are dying younger, the most likely culprit is cigarette smoking. Right up to the 1970’s there was a stigma associated with women’s smoking in public, and this stigma was more pronounced among less educated white women, so their smoking rate was lower. Then the stigma dropped away and smoking rates for all women went up, but much more among the less educated. Women’s smoking rates have now dropped, but much more so among educated white women. So if there’s been a decrease in life expectancy it may be the result of increased lung and other cancers among less educated white women.

http://www.ncbi.nlm.nih.gov/pmc/articles/PMC1380333/pdf/amjph00513-0089.pdf

Should read as follows.
@77
“She is the return on investment,” with preceding text. Also going in the wallet.

but djr, if the govt borrows that money from the financial sector, how much of it would be super funds investing in government bonds?

I don’t think that’s right … what basically happens then is that ordinary people pay someone to manage their money, and then that someone puts a large portion of that money into government bonds, which the government uses to finance infrastructure that leads to economic growth. Under a classic social security system, those ordinary people simply give the govt the money without going through the high-cost financial dealer. It’s just shuffling money around to the same end, with the dealer pocketing a commission and the ordinary people wearing the risk.

@68 As the most prominent Aussie on the blog, I’m thoroughly ambivalent about our retirement income system. Superannuation (= private retirement accounts) is heavily subsidised in various ways, and the system has been repeatedly rejigged. I’d be happy enough with a means-tested public pension, transitional subsidies for private savings for those getting part-pension because of the means test, and self-reliance for those above that level, but that’s a long way from the reality.

faustusnotes @ 115

Yes, exactly. Zamfir covered the disadvantages to letting the finance industry play with SS at the end of the sentence I quoted (“after the bankers took their cut”) and I was taking that as a given, I was just querying whether his suggested advantages actually existed.

There is no rule that bankers always have to take a huge cut in a capital based system. See Norway or Japan. Sweden isnt to bad either.

There is however a rule that the most apocalyptic claims about the demise/unsustainability of put trough pension systems are made by the worst parts of the financial industry that want to sell the most overpriced crap retirment product thinkable.