Tag Archives: Social Security disability

U.S. economy is not recovering. It’s SHRINKING

lemmingsNot only is the economy not recovering, it is worsening, as measured by Amerika’s gross domestic product (GDP).

In the last quarter, the United States’ GDP growth rate actually went negative, at -1.0%, which means the economy shrank by one percent.

The POS blamed the record cold for the negative economic growth rate while, at the same time, pushing the climate change global warming myth, never mind the cognitive dissonance.

first quarter gdp

The Wall Street Journal reports:

The U.S. economy contracted in the first quarter of 2014, the latest stumble for a recovery that has struggled to find its footing since the recession ended almost five years ago.

Gross domestic product, the broadest measure of goods and services produced across the economy, contracted at a seasonally adjusted annual rate of 1.0% in the first three months of the year, the Commerce Department said Thursday. It was the first time economic output contracted since the first quarter of 2011, when it declined at a 1.3% pace.

Government economists had previously estimated GDP slowed to a 0.1% growth rate in the first quarter as harsh winter weather disrupted work sites, curtailed foot traffic at retail stores and snarled transportation networks across much of the U.S. The newly revised estimate incorporates additional economic data released in recent weeks. Higher-than-expected imports and slower-than-expected inventory growth dragged the economy into negative territory.

H/t Gateway Pundit

Meanwhile, there’s really no end in sight for an economic recovery because:

truth

~Eowyn

Advertisements

Does Obama’s 2014 Budget nationalize retirement accounts?

nest eggDo you have retirement savings accounts like IRA or 401k?

Did you get an alarming email from Townhall Spotlight proclaiming that:

President Obama’s FY2014 Budget–Nationalized Retirement Accounts!

I did.

When I clicked “Click Here to LEARN More” in the email, I was taken to a web page of Goldworth Financial with the alarming title of “Obama & BIG Government Are Planning To Seize Retirement Accounts!” Here are Goldworth Financial’s claims:

  1. Obama’s FY2014 Budget Plan brings us one large step closer to de-privatizing IRA’s & 401k’s.
  2. Much like Obamacare, Obama’s “Automatic IRA” will force employers with 10 employees or more, to “automatically” enroll their workers in the new Government run accounts that will be managed by the Social Security Administration(SSA).
  3. A report from the Labor Department and the IRS on The Government Accountability Office (GAO)-”Improve the rollover process for participants“ – establishes a path for participants to rollover their private retirement accounts into Obama’s Automatic IRA.
  4. To assist in the process, the U.S. Treasury Department will rollout a program called ” Treasury Direct” that will allow citizens “to purchase, manage, and redeem…savings bonds” electronically, as well as offering an “option” to purchase such bonds “automatically” through payroll savings .
  5. This coincides with a program being pushed by the Service Employees International Union (SEIU) called “Retirement USA” which would create a government-forced retirement program with assets being directed into special Treasury Retirement Bonds, or R-Bonds. “Retirement USA” is promoting the idea that all workers have a “right” to a government retirement account, in addition to Social Security.

So I went on the net to find the POS’s actual FY2014 Budget. Here it is online in PDF format. I’ve also saved it to FOTM’s media library (click here). I typed in the word “retirement” and —

This is what Fiscal Year 2014 Budget of the U.S. Government actually says about retirement accounts:

1. Automatic Individual Retirement Accounts:

Employers who don’t have retirement plans for their employees will be required to enroll their workers in direct-deposit Individual Retirement Accounts (IRA), but employees can opt out. Below are direct quotes from FY 2014 Budget:

Encourage Retirement Savings with Automatic Individual Retirement Accounts and Support for Small Employers Who Offer Retirement Plans. About half of American workers have no workplace retirement plan. Yet fewer than 1 out of 10 workers who are eligible to make tax-favored contributions to an Individual Retirement Account (IRA) actually do so, while nearly 9 out of 10 workers automatically enrolled in a 401(k) plan continue to make contributions. The Budget would automatically enroll workers without employer-based retirement plans in IRAs through payroll deposit contributions at their workplace. The contributions would be voluntary—employees would be free to opt out—and matched by the Saver’s Tax Credit for eligible families. Small employers would be eligible for tax credits to defray the administrative costs of setting up these savings plans. The Budget would also double the existing tax credit for small employers that start up new qualifying employer plans. (p. 18, FY 2014 Budget)

Establishes Automatic Workplace Pensions and Expands the Small Employer Pension Plan Startup Credit. Currently, 78 million working Americans—roughly half the workforce—lack employer-based retirement plans. The Budget proposes a system of automatic workplace pensions that will expand access to tens of millions of workers who currently lack pensions. Under the proposal, employers who do not currently offer a retirement plan will be required to enroll their employees in a direct-deposit Individual Retirement Account (IRA) that is compatible with existing direct-deposit payroll systems. Employees may opt out if they choose. To minimize burdens on small businesses, those with 10 or fewer employees would be exempt. Employers would also be entitled to a tax credit of $25 per participating employee—up to a total of $250 per year—for six years. To make it easier for small employers to offer pensions to their workers in connection with the automatic IRA proposal, the Budget will increase the maximum tax credit available for small employers establishing or administering a new retirement plan from $500 to $1,000 per year. This credit would be available for four years. (p. 127, FY 2014 Budget)

2. “Wealthy” Americans will be limited to no more than $3 million in tax-deferred retirement accounts:

Prohibit Individuals from Accumulating Over $3 Million in Tax-Preferred Retirement Accounts. Individual Retirement Accounts and other tax-preferred savings vehicles are intended to help middle class families save for retirement. But under current rules, some wealthy individuals are able to accumulate many millions of dollars in these accounts, substantially more than is needed to fund reasonable levels of retirement saving. The Budget would limit an individual’s total balance across tax-preferred accounts to an amount sufficient to finance an annuity of not more than $205,000 per year in retirement, or about $3 million for someone retiring in 2013. This proposal would raise $9 billion over 10 years. (p. 18, FY 2014 Budget)

3. “Wealthy” Americans can’t claim their retirement contributions in itemized tax deductions beyond 28%:

Reduce the Value of Itemized Deductions and Other Tax Preferences to 28 Percent for Families with Incomes in the Highest Tax Brackets. Currently, a millionaire who contributes to charity or deducts a dollar of mortgage interest enjoys a deduction that is more than twice as generous as that for a middle class family. The Budget would limit the tax rate at which high-income taxpayers can reduce their tax liability to a maximum of 28 percent, a limitation that would affect only the top three percent of families in 2014. This limit would apply to: all itemized deductions; foreign excluded income; tax-exempt interest; employer sponsored health insurance; retirement contributions; and selected above-the-line deductions. The proposed limitation would return the deduction rate to the level it was at the end of the Reagan Administration. (p. 36, FY 2014 Budget)

4. Federal civilian workers’ contributions to their retirement will increase from the present 0.8% to 1.2%-3.1% of their pay:

Reform Federal Civilian Worker Retirement. The President’s 2011 Plan for Economic Growth and Deficit Reduction proposed to increase the Federal employees’ contributions toward their accruing retirement costs, from 0.8 percent to 2.0 percent of pay, over three years, beginning in 2013. In response, the Congress created the Revised Annuity Employee retirement plan for Federal employees hired after 2012, through which those employees contribute 3.1 percent of their pay toward their pensions. In order to make reasonable adjustments to contributions made by those who joined the workforce prior to 2013, the Budget again proposes to increase contributions of those employees by 1.2 percent of pay, over three years, beginning in 2014. While Federal agency contributions for currently accruing costs of employee pensions would decline, these Federal employers would pay an additional amount toward unfunded liabilities of the retirement system that would leave total agency contributions unchanged. Under the proposed plan, the amount of the employee pension would remain unchanged. This proposal is estimated to save $20 billion over 10 years. In addition, the Budget again proposes to eliminate the FERS Annuity Supplement for new employees. These changes are expected to neither negatively impact on the Administration’s ability to manage its human resources, nor inhibit the Government’s ability to serve the American people. (p. 42, FY 2014 Budget)

To conclude:

The Townhall/Goldworth Financial email is somewhat deceptive. While I don’t doubt the federal government is desperate for more revenue (to stanch the various bleeding entitlement programs, especially Social Security Disability that is due to go bankrupt in 3 years, by 2016) and is lusting after the American people’s private pensions and retirement accounts, the government at present is not “nationalizing” those accounts.

Having said that, to “require” all private-sector employers to set up pensions or retirement plans for their employees is to increase even more the power of the already too big, too bloated, and too tyrannical Big Government, while commensurately decreasing our freedom.

As currently proposed in FY 2014 Budget, our participation in “automatic” payroll-deduction “Individual Retirement Accounts” is VOLUNTARY. Employees can opt out.

But I have no doubt that the proposal is a step toward the government eventually getting its filthy hands on our retirement savings (think Parable of the Frog in Slowly Boiling Water). Given that, I recommend that we oppose and resist Obama’s idea of “automatic Individual Retirement Accounts.”

Tell your (useless) Congress critters “Hell No!”

~Eowyn

America’s Retirement Disaster: 50% of Boomers have less than $12k in retirement savings

A disaster is in wait for Americans in their retirement years.

Put simply:

Too many Americans are dependent on the government (Social Security and public pensions – more on that below), instead of putting aside savings to ensure our financial security in our “golden” years.

Jim Quinn of The Burning Platform blog, has put together a bar graph that shows how perilously little Americans have in retirement savings:

After a lifetime (presumably) of working, the median Boomer household (age 55 to 64), has managed to accumulate only $12,000 in retirement savings. $12,000 isn’t even enough to support one person, much less a household, for a year. Since “median” is that figure that divides a population into two halves, this means that 50% of Americans age 55 to 64 have less than $12,000 saved for their retirement.

As Quinn colorfully puts it: “These 55 to 64 year olds are up shits creek without a paddle. No wonder the percentage of over 55 people working is at an all-time high.”

But it’s not just the Boomers: Every age bracket has been living in a land of delusion. The median retirement savings of all non-retirement age Americans, 25 to 64 years old, is only $3,000. The entire country has bought into the ”live for today” mantra.

And if you think you can rely on government in your “golden” years, think again.

To begin, Social Security is broke. There is no “trust fund” because for years, the federal government has been dipping into that “trust fund” to make up for its budget deficits. The “trust fund” is an accounting fiction that exists only on paper.

To make matters worse, even if we go by the mythical “trust fund,” Social Security will go broke in 4 years, by 2017, when it will pay out more in benefits than it takes in. In the 1950s, there were roughly 5 workers for every retiree; today, it is roughly half of that. With 78 million Baby Boomers moving into retirement, the demands on Social Security will be even greater in the coming years ahead. With demographics heading in the wrong direction and a much slower-growth economy, the Social Security Administration has moved up its estimate that the Social Security Fund will be exhausted entirely by 2033.

The first Social Security program to go broke will  be Social Security Disability (SSD), which has seen the biggest number of recipients dependents in the 4 years 8 months of the Obama presidency. Today, more than 28 million Americans who are of working age claim to have a disability – a level higher than at any other time in recorded history. But there are good reasons for us to question how many of the 28 million SSD recipients are actually disabled. (See Many on Social Security Disability can but don’t want to work,” Aug. 3, 2013.)

According to a Social Security trustees report released in April 2012, SSD will run out of cash in three years, by 2016, when incoming payroll-tax revenue will cover only 79% of SSD benefits. Because the plan is barred from running a deficit, disability aid would have to be cut, which means SSD recipients will get only about 80% of the monthly payments they used to get.

Then there’s public or government pension, whether federal, state, or local.

As I explained in my post of August 18, 2013 (“Why there will be many more Detroits – in one chart”) and as the graph below shows, public employees pensions are, without exception, severely underfunded because they are based on the expectation that whatever money that’s paid into those funds gets 7% to 8% interest. The only problem is the Federal Reserve is and has been suppressing interest rates to an anemic 1-2% because if the Federal Reserve lets interest rates go up, our already gargantuan national debt of nearly $17 trillion (some say it’s actually $70 trillion) will balloon even quicker.

underfunded pensionsJim Quinn grimly concludes:

“We have trillions in unfunded Social Security obligations that won’t be paid. Cities and States have trillions in unfunded pension and health benefits that won’t be paid. The government and its citizens have lived above their means for decades and haven’t saved for a rainy day or their futures. […] There is no possible scenario where this ends well or can be solved by another government solution. It’s too late.”

Is it too late?

The one chance we have is if we get a pro-growth leader in the White House and a pro-growth party in both houses of  Congress.

America is rich in energy resources. We can be independent in energy if we want to, instead of being reliant on oil imports from the troublesome Middle East.

If we give free rein to oil exploration and development — instead of the Obama regime’s obstruction and hampering, in pursuit of the chimera of “green” energy by wasting millions of taxpayer dollars on unprofitable, corrupt, and ultimately bankrupt solar energy ventures like Solyndra (which alone received $535 million in never-repaid “loans” from the POS) — we can not only become energy independent but also create millions of jobs. The economy will grow and with that, we can grow ourselves out of our unfunded liabilities and our national debt.

We had that chance in 2012 with Mitt Romney. 😦

See also:

~Eowyn

Many on Social Security Disability can but don’t want to work

Why are we demonized for speaking the truth?

truthH/t FOTM’s Trail Dust

More than a year ago, in May 2012, Lance Roberts wrote that Without government largesse many individuals would literally be living on the street.” As much as 1/5 or 22.5% of the average American’s income is dependent on “government transfers.” 

One of those “government transfers” are Social Security Disability benefits.

There are two types of Social Security Disability benefits:

  1. Social Security Disability Insurance (SSDI): Earned disability benefits for those who have held jobs for significant periods of time and paid at least partially into Social Security before becoming disabled.
  2. Social Security Disability (SSI): Unearned disability benefits for individuals who have petitioned to be classified as disabled, although many of them have never worked and have never paid into Social Security.

Under Obama, the number of Americans claiming disability has surged to the highest levels on record since the beginning of the last recession. What is most notable, however, is when the surge of disability claims began – exactly two years from the beginning of the financial crisis. This was when the 2 years of extended unemployment insurance began to run out.

Unlike welfare, disability isn’t term-limited, and in some cases it’s become permanent unemployment insurance for the unemployable or those who simply refuse to work.

Today, more than 28 million Americans who are of working age have a disability – a level higher than at any other time in recorded history. There are approximately 11 million SSDI or earned recipients and approximately 7 million SSI or unearned recipients.

But how many of those on disability are actually disabled?

Luke Rosiak reports for the Washington Examiner, July 30, 2013, that a study by the Social Security Administration found some disturbing, but unsurprising, attributes of disability recipients:

  • Recipients of federal disability checks often admit that they are capable of working but cannot or will not find a job.
  • Returning to work is not a goal for 71% of the SSDI recipients, and 60% of the SSI recipients.
  • Most have never received significant medical treatment and not seen a doctor about their condition in the last year, even though medical problems are the official reason they don’t work.
  •  Those who acknowledge they’re on disability because they can’t find a job say they make little effort to find one.
  • Of those who say they’re actually looking for a job, most say they’re looking only for part-time jobs that will allow them to keep their disability benefits.
  • The unearned disability recipients are in less pain than their counterparts who had paid into the system. In other words, they are using SSD as a substitute for welfare. These individuals are typically overweight, uneducated and from broken homes.
  • There are practical barriers to weaning recipients off the disability rolls. The jobs they’d be candidates for often don’t provide health insurance, which is essential for those with medical problems, and they’d rather receive the SSD benefits. Many also say they don’t have transportation to work.
  •  72% of the small number of SSDI recipients who started a job while on disability got cash under the table, as did 70% of the small number of SSI recipients who started a job while on disability.
  • 24% of the SSDI recipients lack even GEDs, as do 43% of the SSI recipients.
  • Only 18% of SSDI and 15% of SSI recipients said, during the past 4 weeks, they could not do social activities with family or friends because of their physical health or emotional problems.
  • As many as 96% of SSDI and 91% of SSD recipients admit whatever physical health or mental problems they have do not hinder or limit them from the kind or amount of work or other daily activities they do. In other words, they are not really so disabled they can’t work.
  • 47% of SSDI and 41% of SSD recipients are obese; 30% of both groups are overweight; only 21% of SSDI and 25% of SSD recipients are of normal weight.
  • 28% of SSD recipients had never worked for pay, i.e., they never had a job!
  • Most SSD recipients don’t bother to educate themselves about or avail themselves of government programs to wean them off disability, such as the Plan for Achieving Self-Support, Earned Income Exclusion, and Continued Medicaid Eligibility after they get off disability benefits.
  • Many disability recipients also receive other government welfare benefits: 28% of SSDI and 81% of SSD recipients are on Medicaid; 80% of SSDI and 42% of SSD recipients are on Medicare; 18% of SSDI and 52% of SSD recipients are on food stamps.
  • The lack of a spouse is a significant factor: 54% of SSDI and 88% of SSD recipients are not married.
  • 11% of SSDI and 21% of SSD recipients have been receiving disability benefits for 20 years or more.

Source: Public use file round 4

America’s national debt now exceeds our GDP and is closing in on $17 trillion. It doesn’t take an Albert Einstein to know that our super-extended welfare state cannot continue as it is. Indeed the danger signs are already visible.

In three years, by 2016, the first of the Social Security funds — Social Security Disability — will be in full collapse.

Brian Faler reports for The Washington Post, May 30, 2012:

The disability program pays benefits averaging $1,111 a month, with the money coming from the Social Security payroll tax. The program cost $132 billion last year, more than the combined annual budgets of the departments of Agriculture, Homeland Security, Commerce, Labor, Interior and Justice. That doesn’t include an additional $80 billion spent because disability beneficiaries become eligible for Medicare, regardless of their age, after a two-year waiting period. The disability program is projected to exhaust its trust fund in 2016, according to a Social Security trustees report released last month. Once it runs through its reserve, incoming payroll-tax revenue will cover only 79% of benefits, according to the trustees. Because the plan is barred from running a deficit, aid would have to be cut to match revenue.”

Lastly, since the American Medical Association recently declared obesity to be a “disease,” expect even more Americans to apply for and receive Social Security Disability benefits.

~Eowyn

“We are a dying country”

The state of the U.S. economy as of March 2013:

H/t Drudge Report, ImpeachObamaCampaign.com, and FOTM’s Miss May

~Eowyn

The Day America Committed Suicide

“Every nation has the government it deserves.”

So observed a very wise man — Count Joseph-Marie de Maistre (1753-1821), a French philosopher and diplomat.

Future historians (if there are any) will record that on November 6, 2012, the no longer United States of America committed suicide.

We, the Opposition — comprised of Conservatives, Christians, Libertarians, and Patriots — had been telling ourselves that the polls showing a tight race must be wrong. Because the pollsters over sample Democrats. Because “nobody” have landline phones anymore. Because so many polling organizations are corrupt. Because….

In the end, it turns out the polls not only were right, they were overly optimistic for Romney.

In the end, the Electoral College vote count wasn’t even close:

332 for Obama v. 206 for Romney

In the end, instead of Romney winning by a landslide, it was the POS winning by an avalanche. The POS even won the popular vote: 62,615,406 vs. Romney’s 59,142,004. [Source: FoxNews]

Romney won Alabama, Alaska, Arizona, Arkansas, Georgia, Idaho, Indiana, Kansas, Kentucky, Louisiana, Mississippi, Missouri, Montana, Nebraska, North Carolina, No. Dakota, Oklahoma, So. Carolina, So. Dakota, Tennessee, Texas, Utah, West Virginia, and Wyoming.

POS won California, Colorado, Connecticut, Delaware, Hawaii, Illinois, Iowa, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Hampshire, New Jersey, New Mexico, New York, Ohio, Oregon, Pennsylvania, Rhode Island, Vermont, Virginia, Washington, Washington D.C., and Wisconsin.

In the end, the swing states of Ohio and Virginia swung to the POS. As of this writing, Florida — with 97% of precincts having reported — is still a toss-up (O 50% vs. R 49%). Not that it matters.

Was it massive Demonrat electoral fraud that did it?

Was it Demonrats’ intimidation — all the threats of riots and assassination, and videos of 97-year-olds threatening to “burn this motherfucker down” and of Romney supporters being maimed, decapitated and exploded — that got to gutless voters?

We can debate all we want. Sure, there’ll be feeble efforts at “investigating” and of lawsuits. But the POS’s so-called Department of “Justice” under his henchman, the so-called “U.S. attorney general” — Amerika’s chief law enforcer! — Eric Holder, will simply stonewall everything.

But I do know this:

The sheeple who voted for the POS so that they’ll keep getting government handouts, welfare, and entitlement checks are in for a rude shock. Amerika is broke. As we Cassandras have been warning here on Fellowship of the Minds:

  • Our national debt is over $16 trillion — more than Amerika’s gross national product.
  • The main Social Security program — the so-called SS “Trust Fund” — will run out of money even sooner than we’d been told — by 2023, instead of 2033. When that happens, BY LAW your Social Security checks will be cut by 25%.

The above bankrupt dates will now be shortened now that the POS and his Demonrats have four more years to overspend, without restraint. And if you think taxing “the rich” will plug the gaping deficit hole — not that taxing “the rich” 100% can fill the hole — you’re delusional.

Unlike the delusional sheeple sucking on Big Government’s teats, “the rich” have both the resources, the means, and the will to simply leave the “United” States. Just as “the rich” in France have and are, after the French sheeple voted in a socialist government that immediately imposed a draconian 75% tax on “the rich.”

Congratulations, my fellow selfish, lazy, envious, covetous, willfully ignorant, stupid, and just plain evil Amerikans.

Yesterday, you voted for a thoroughly evil man and evil party. In so doing, you voted for your own doom. The next four years will be four years of one financial disaster after another. The next four years will see your constitutional freedoms fall, one after another. And if you complain, you sheeple will finally discover:

  • What Obama’s senior adviser consigliere, the Iran-born Marxist Valerie Jarrett, meant when she vowed: “After we win this election, it’s our turn. Payback time. Everyone not with us is against us and they better be ready because we don’t forget. The ones who helped us will be rewarded, the ones who opposed us will get what they deserve. There is going to be hell to pay. Congress won’t be a problem for us this time.No election to worry about after this is over and we have two judges ready to go.”
  • Why there’ve been sightings across Amerika of trucks jammed full of “Martial Law” signs. (FOTM decided not to report this, not wanting to make you “nervous” before the election.)

*Faithful Catholics who attend Mass weekly went for Romney.

For as long as Obama, the Demonrats, and WordPress choose to keep the Internet free, Fellowship of the Minds will continue to chronicle Amerika’s descent into the abyss. Just don’t be surprised when one morning you fire up your computer to come on FOTM to discover we’re not around any more. When that day comes, don’t say I haven’t warned you….

In sorrow,

~Eowyn

Fed’s low interest rate is killing Social Security

Already, we are told that Social Security (SS) is in trouble, forecasted to start paying out more in benefits than it takes in by 2017, and to go completely broke by 2033.

But there is yet another reason why Social Security is heading to ruinage even faster — the Federal Reserve’s low interest-rate policy. The reason for that policy, of course, is to keep America’s GARGANTUAN national debt from ballooning even faster than it already is.

But the Fed’s policy means U.S. Treasuries offer record-low interest rates. (As an example, the last auction of 10-year Treasury Note, on July 6, 2012, yielded an interest rate of 1.544% !) This is creating a problem for retirees who, in their work years, had been frugal and conscientiously saved to secure their “golden” years, but now find themselves unable to live off the paltry interest generated from their savings and must dip into their principal. The Fed’s policy is also a problem for investors, among whom is none other than the Social Security Trust Fund (SSTF).

Writing for ZeroHedge, July 4, 2012, Bruce Krasting explains that in June of each year the SSTF reinvests a significant portion of its investment portfolio in newly issued Special Issue Treasury Securities. The interest rates on these bonds is set by a formula that was established in 1960. The formula was designed to insulate the SSTF from transitory changes in interest rates by averaging market based bond yields over a three-year period.

But Ben Bernanke’s Fed Reserve has set interest rates at zero the past four years. The result is that in 2012, the 1960’s formula has finally caught up with the SSTF. It got murdered on this year’s rollover.

Data from the Social Security Administration (SSA) show that $135 billion of old bonds matured this year. This money was rolled over into new bonds with a yield of only 1.375%. The average yield on the maturing securities was 5.64%. The drop in yield on the new securities lowers SSA’s income by $5.7B annually. Over the 15-year term of the investments, that comes to a loss of $86 billion. It gets worse.

Bernanke has pledged that he will keep interest at zero for a minimum of another two years. Since the formula used to set interest rates for SSA looks back over the prior three years, this means SSA will be stuck with a terrible return on its investments until at least 2017, which means still lower investment returns for the next five years.

A total of $543 billion of securities with an average yield of 5.6% is coming due. The reduction in income from the 4.2% drop in yield translates to $23 billion a year, totalling $350 billion for 15 years. It gets worse.

Not only will SSA’s interest income substantially drop over the coming decade, the problem is exacerbated because SSA has provided projections for its interest income over this time period that don’t jive with this reality.

In its 2012 report to Congress, the Social Security Administration maintains it will earn an average of 4% over this period. That is not possible any longer. Given the Fed’s low interest-rate policy, the most SSA could earn is an average of 2.3% (it could be significantly lower). The drop in yield translates to a reduction in income of $535B over the forecast period.

Based on a realistic assessment of interest income at SSA, the trust fund tops out in 2015, its peak value will be ~$2.823B. The SSTF has reported that the TF will top out at $3,061B, and that milestone will not be reached until 2021. Essentially, the train wreck will happen 6 years earlier then assumed, and the TF will be $250B short. It gets worse.

The other key ingredients in the SS “pie” are tax receipts from workers and the amount of monthly benefit payments (the assumptions used is that GDP growth will average 4%, and unemployment falls to 5.5% –  no recessions over the ten-year horizon). These are not realistic assumptions. This means that once the SSTF hits its peak in 2015, the run off in assets will happen very quickly.

The SSTF has stated that the date in which the Trust Fund falls to zero will be 2033. The actual termination date of the Social Security Trust Fund is much closer than that. It could come as early as 2023.

Anyone who is 55 or older should be worried about this. Based on current law, all Social Security benefit payments must be cut by (approximately) 25% when the Trust Fund is exhausted. This will affect 72 million people. The economic consequences will be severe. The drop in SS transfers translates into a permanent drag on GDP of 2%. In other words, when this happens, the country will be unable to have any significant positive growth for a long time to come.

Given the prediction that the Social Security Trust Fund will fall to zero by 2023, that is in 10-11 years, if you are or will be receiving Social Security, you should expect your SS checks to decrease by 25%. Make your plans accordingly!

But the news get even worse.

Even before 2023 arrives, in just FOUR years, by 2016, the first of the Social Security funds — SS disability — will be broke, having plain run out of cash. This will trigger a 21% cut in benefits to 11 million Americans — people with disabilities, plus their spouses and children — many of whom rely on the program to stay out of poverty. [Source: Washington Post]

In summary, the monetary policies of Ben Bernanke and the Federal Reserve aren’t just breaking the backs of small savers, they are killing Social Security. The results will be:

  • Social Security Trust Fund will run out of money even sooner than we’d been told — by 2023 (instead of 2033). When that happens, by law Social Security checks will be cut by 25%.
  • Social Security Disability will run out of money even sooner, in just 4 years by 2016. When that happens, your disability checks will be cut by 21%.

If you don’t make plans for the impending disaster now, you’re in willful denial. Don’t say you haven’t been forewarned!

~Eowyn