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3 Hard To Believe Social Security Factors – The Motley Fool



Social Security is a critical retirement program that seniors simply can not afford to do without. An analysis by the Center for Budgetary and Policy Priorities in 2016 showed that the mere presence of social benefits for millions of retirees exceeds 15 million of them each year, above the federal poverty line.

Despite the importance of social security, Americans have proven time and again how little they actually know about the program. In fact, the newly published Five-Question, True False, Social Security Quiz by MassMututal found that nearly half of all seniors ages 50 and older failed their online test. Considering that we, as a country, are struggling with basic social security concepts, the following three elusive facts about social security could be an even more severe pill.

  A W-2 pay stub next to two social security cards

Source: Getty Images

1
. $ 1 Billion Annual Income Just Is not Good enough

Perhaps the biggest social security kick-off is that, despite the fact that the program is earning just over $ 1 trillion this year, it will not be enough which will pay off in benefits in 2018 or any year thereafter, based on the current payout schedule.

According to the Social Security Board of Trustees report 2018, the program is expected to pay $ 1.7 billion more in benefits than it will generate revenue this year, $ 0.2 billion more in 2019, and then every year to run an increasingly larger deficit at least until 2027. The report suggests that by 2034, social security will have used up its reserves to the full, necessitating a 21% overall reduction in social benefits.

If there's good news for seniors here, then social security itself is not bankrupt. Even with a non-sustainable disbursement plan that could eradicate its asset reserves, from 2018 social security will continue to generate the bulk of its income tax revenue from 12.4% to payroll revenues of up to $ 128,400. As long as the American public remains At work, this tax continues to be levied and provides funds that Social Security Administration can use for eligible beneficiaries.

  An accountant chewing a pencil and examining numbers closely.

Source: Getty Images

2. Social security needs $ 13.2 trillion to remain solvent in the next 75 years

Quantifying the long-term social security deficit – defined as the next 75 years – is another endeavor. Assuming that Congress can not generate additional revenue by 2034, when the $ 2.9 trillion in surplus cash mentioned above is used up, Social Security will probably be spending $ 13.2 trillion in cash between 2034 and 2092, based on the current disbursement plan liquidate.

I repeat again that this does not mean that social security is insolvent. It simply means that maintaining benefits where they are now is not sustainable without additional revenue and / or long-term spending cuts.

Democrats have suggested removing this long-term budgetary gap by increasing payroll taxes to the rich. Currently, any income in excess of $ 128,400 is exempt from payroll tax. So while more than 90% of working Americans pay into social security with every penny they earn, a single-digit percentage of wealthy wage earners escapes at least part of their income. Raising or abolishing the maximum taxable salary ceiling would force the rich to pay more and bridge the long-term shortfall.

As for the Republicans, they would prefer to cut spending in the long term by gradually increasing their full retirement age from age 67 to age 2022 to age 68 to age 70. Your full retirement age is the point at which you receive 100% of your retirement pension, which is determined by your year of birth. By increasing the full retirement age, the GOP would force workers to wait longer to apply for benefits or to accept a steeper permanent reduction in their payout if they call early. Either way, it would reduce the long-term social security expenditure and eliminate the shortage.

The irony is that both solutions work – and because they work, no party gives an inch and hits the other in the middle and perpetuates the stalemate for a fix.

  A fanned heap of hundred-dollar bills on a pile of accumulated government bonds.

Source: Getty Images.

. 3 Just because you can not see the social reserves holding $ 2.9 trillion in reserves does not mean they are not there

Another social security number that's hard to believe (but still true) actually has $ 2.9 trillion in asset reserves right now – and no, Congress has not raided, stolen, or resigned to it.

Although the Social Security Trust could just sit on the excess money that has built up over the past 35 years. The program was last revised, which would not make sense. Cash loses purchasing power over inflation every year.

Instead, the Social Security Institution buys special bonds and, to a lesser extent, promissory notes with various maturity dates. The total portfolio of debt securities and bonds had an average yield of around 2.9% as of March 2018.

As for those people who perpetuate the myth that social security lawmakers have stolen, they do not know that the federal government is already paying interest on the Social Security program – $ 85.1 billion in 2017. The Confederation is also satisfied with the full balance of a maturing bond or certificate of debt. In the end, these records are backed by the full faith and creditworthiness of the US government, which tends to fund general revenue streams by selling debt.

Just because you can not see trillions of dollars in the Social Security Reserve Money does not mean it does not exist!


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