Why the negativity?
One of the oddest things I’ve witnessed in my 5 decades on this earth is how people are taken in by fear. It’s human nature, I realize, but man, oh man, much of this fear is simply irrational.
I did a video yesterday on a Wells Fargo-sponsored poll that showed 71% of Americans are afraid Social Security won’t be there for them.
(By the way, my book You Can RETIRE on Social Security is now available on audio. Get it here.)
Now, mind you, I take this with a grain of salt as I trust polls anymore as far as I can kick them. Modern-day polling is used to establish a narrative, not to survey it. As such, I’m not surprised a financial services company would sponsor a poll that purports to show Americans fearful of retirement.
Ironically, Wells Fargo just happens to have solutions, and, by the way, the solutions Wells offers are very, very popular. The polling shows it. If only Congress would act… BWHAHAHAHA
Anyway, the idea Social Security won’t be there is just silly. I’m sorry if this offends you but if you’re building a retirement plan without taking Social Security into consideration, you are wrong. That’s all there is to it.
Is Social Security fully funded? Of course not. Name one government program that is.
Do some changes need to be made to Social Security funding? Sure, as I’ve stated a million times to Sunday, according to the Intermediate assumptions on the Trustees report a simple payroll tax increase of 1.35% to the employee and employer and we’re done.
And that’s assuming the Intermediate assumptions are actually correct. Yet the Intermediate assumptions have an unemployment rate of 5.5% from 2027 until 2094.
After a rock-solid jobs report yesterday, we are at 3.6% and have been under 4% for quite some time now. Is 3.6% an anomaly? Hardly…
“The unemployment rate in Japan climbed to 2.4 percent in September 2019, rebounding from near 30-year lows and topping market expectations of 2.3 percent. The jobs-to-applications ratio fell to 1.57, the lowest since November 2017 and below market expectations of 1.59. Unemployment Rate in Japan averaged 2.72 percent from 1953 until 2019, reaching an all time high of 5.50 percent in June of 2002 and a record low of 1 percent in November of 1968.”
I cite Japan here because I personally think we’ll mimic their economy for years to come; An aging population; large debt to GDP levels, yet low inflation, low unemployment too. And frankly, lower growth.
Yes, Japan isn’t immigrant friendly. I get that. And that may be a defining difference between us and them. I don’t think so actually. With the vast amounts of immigration to the States in the last 30 years here we are, 3.6% unemployment. Growth at 1.9%. Interest rates way low, inflation as well. Just like Japan.
Now, back to the Social Security Trustees report. The interesting thing that naysayers will say (assuming they actually read the thing, which is a far-fetched assumption) is that the Intermediate numbers expect much higher interest rates than we have now. As such, the Social Security “trust fund” won’t receive as much interest income as the Intermediate report projects.
I find this an interesting take. No one suggests the so-called Trust Fund will have any assets in it come 2034, no? So if no assets in the Trust Fund, why would interest payments on those assets matter, if there are no assets in which to draw interest?
This argument is like saying that Charlotte and I need high interest rates at the bank in order to retire. But we have NO money at that bank. Thus high interest rates do nothing for us. Low interest rates are irrelevant if we have no money either.
Is the “trust fund” fully funded? No! Soon (2034), it’s only going to have enough receipts from payroll taxes to pay 77 cents on the dollar, again under the Intermediate assumptions.
So, low interest rates are irrelevant for the most part.
But what is NOT irrelevant are the number of people actually paying payroll taxes, i.e., the number of people working. Low unemployment means a heck of a lot of people paying into the system with each paycheck they receive.
With a population of 330 million or so, a difference between an expected 5.5% unemployment and we’ll just say 4% is a huge, HUGE, number, meaning the payroll tax receipts are way higher than the Trustees expect.
But even this piece of positive news doesn’t matter.
Ultimately, what matters is the people who vote. No politician is going to allow Social Security to go away. A politician has one goal and one goal only, re-election. If a politician advocates reneging on the pledges to the taxpayer regarding Social Security, voters of ALL political stripes will kick that person to the streets. And rightly so.
I’m an anarcho-capitalist. Which means I despise the statism of a huge government. But even I value Social Security. I would not have voted for it in the 1930s if I were in office. But the facts are it IS here. I paid into it. I fully expect to receive benefits from it. And I will. You will too.
Does that make me a hypocrite? Being against big government while using benefits derived from it? Not any more than also using the GI Bill to pay for my college education.