The financing of the Border Wall, a government deadlock (or a government showdown!), Trade relations and tariffs between the US and China, the Fed raised interest rates with a volatile stock market – over this holiday there was enough worries over the season. However, something else happens silently, but one of the most important topics in American history.
I refer to what I call the imminent disempowerment of our social security system, at least as we know it.
Discrimination, a rather blatant word, is defined as the state of deprivation of a right or privilege. As a lawyer, I should know better than to use this word in relation to social security, since the US Supreme Court ruled in 1
However, most Americans expect that "their" social security will be there for them in their present form. But that will not – at least that's what modern mathematics tells us.
Make no mistake, Social Security is a system in which you can pay. Although the Trust Fund has an estimated US $ 3 trillion, this only reflects the bookings of net surpluses to which the Fund has been credited, plus interest earned since inception. There is no real money in the fund, only government bonds with special issues, which are in fact sovereign bonds. The real surpluses were used by the federal government as a source of funding for many things.
But not anymore – the days of surplus payments are over now and will apply under the current system for the next 75 years. For the first time since 1982, more benefits will be paid this year than revenue. This is no surprise to the government as it has projected and forecasted these figures based on our demographic information in the trustee report since 1941.
But as difficult as it is to swallow this is not the problem I focus on. What consumes me is the much bigger problem of what's coming. If you reduce the birth rates between 1946 and 1964, you see that births peaked in 1957 and followed closely until 1964. This means that about 70 percent of boomers have not even retired. The generation will retire over a five to seven year period, one year later.
In other words, our system now consists of about 2 full-time equivalent payers for each recipient who receives social security benefits (2: 1). That costs us more than we think, and 70 percent of this big generation still has to be recipients in the system. ( 2018 report of the trustee showing 2.8-to-1 includes all workers who have ever worked during the year, and does not reflect the true contributors of the system .)
Think Remember that a boomer retires every time, they are doubly negative for the federal budget because they do not contribute to a retired contribution (first negative effect) from a positive contribution through payroll tax and then move on to the scheme as recipients (second negative budget effect). , The lower birth rates of Gen X and Millennials, comparatively without surplus immigration, do not help.
Before Paul Ryan was Speaker of Parliament, he clearly asked the CBO to analyze these future issues as early as 2008. If benefits paid through Social Security, Medicare and Medicaid persisted with the departure of baby boomers (at 2008 levels), benefits would have to be cut, taxes would have to increase, or BOTH.
Rock and a hard place
If you are one of those in the camp of "No politician will be chosen who will cut our social benefits," as I hear it so often in my work across the country, I want to give you one another hard way imagine reality. The timing of the mass resignation of our Boomer generation collides with the fact that our federal debt is reaching an unsustainable critical mass.
At around $ 22 trillion and rising, we will not be able to finance these benefits for long periods of debt. Once the total debt has dropped to $ 30 trillion, which could – as forecast – happen with the projected $ 1 trillion deficits in less than 8 years, interest rates alone will cost us more than we would for Medicare and spend the military together – a simple impossibility the United States.
It is clear that the saying can no longer be pushed down the street. The road is over, and the cliff is like the iceberg for the Titanic.
We can not find a way. In my view, it is a mathematical certainty that the benefit will be cut (I believe on a kind of aggressive funding basis) and taxes will rise (probably dramatically even after mathematics).
And therefore the word … The imminent "deprivation" of social security – the Americans are deprived of the privilege of full benefits to which they refer. It is no wonder that Congress has expressly reserved the right to amend, amend, or repeal provisions of the law, and the US Supreme Court has determined that this is not a right. We need to wake up and prepare accordingly.
Rebecca Walser is a certified tax lawyer and graduate financial planner and author of the book Wealth Unbroken, which specializes in strategic planning to maximize lifelong wealth while minimizing the tax burden of her practice. Walser Wealth Management. She holds a doctorate from the University of Florida and a doctorate from New York University. She is a frequent national media spokeswoman.