Imagine my surprise when I realized just a few months ago that I was now old enough to apply for social security.
Younger, blue-collar-raised me thought I should hold out on applying for social security until I was 70 so as to get the largest monthly payout.
Older, hopefully-wiser me (who has since learned about investing) applied for social security immediately and will stash the disbursements into an index fund until I actually need them.
(I'm oversimplifying because there are other factors to consider, but generally, historic returns on the stock market suggest you'll have more by age 70 by investing he disbursements when you're 62 than social security would have paid out if you had waited until 70.)
(Wild to imagine a system that was put in place that requires the recipient to guess how long they think they're going to live and choose when to start payments. Some kind of personal prediction market of one…)
The wife was on board my starting at age 62 simply because of talk of social security solvency issues like the headline.
Yes, and the sky may fall tomorrow. The longer I live the more I read these sensationalist headlines designed to gin up angst and antagonize people's peace of mind.
Social Security's solvency has been the subject of much debate, but clearer heads point toward a graduation of the current system to include higher earners. That will accommodate the large aging population's demand. Case closed, easy peasy lemon squeezy.
If nothing is done it’s a mathematical fact. The problem is that there are no plans to do anything yet, each administration and congress seeing it as too politically volatile to deal with, which means we will have a last minute suboptimal solution.
Obviously there are solutions. Maybe if America survives that long we might see one implemented.
Sure, if nothing is done. The trust fund redeeming its bonds is little different than the congress appropriating money for Social Security benefits; both come out of the current revenue of the USG. When the trust fund no longer has any bonds to redeem, there's nothing stopping congress from continuing to transfer money into Social Security to pay benefits at existing levels. They'll just have to vote on it rather than it happening automatically.
2033 is when all the bonds should have been redeemed and there is no money left to redeem, just contributions coming in and more payments going out. And yes, congress can do a straight injection from the general fund, it’s just even more deficit spending at that point.
Great, so everyone in their 60s works for a decade more, as their health declines, and everyone under 60 has to deal with the increased unemployment that would cause.
It would be better to just get rid of the loophole for the rentier class (The FICA cap at $186,000), and this actually would be solved.
Ya, there are wide different outcomes to consider with respect to health. Also people should really be retiring earlier, not later, as automation picks up. The way things are progressing right now are just whack.
Personally I watched my Grandpa wither away from Parkinsons and eventually Alzheimer's for over a decade, starting only a couple of years after he retired. He spent most of his retired life in hospice care not recognizing his children or grandchildren.
Knowing that is likely my eventual fate too, I really don't want to wait to the last possible minute to retire.
It's a huge shame we can't accurately predict future illnesses and such, we could plan so much more effectively. As it stands we have to do our best and live good lives before we aren't capable of that anymore. Many people won't have a nice retirement. Many won't even live that long in the first place. Society can probably do better for everyone than we currently do
A quick check (ie, letting ChatGPT do the math) shows that if all caps on taxation was eliminated, it would help, but not solve the problem completely.
I never imagined that, in my lifetime, Roe would be overturned or that entirely untrained federal thugs would be allowed to murder people on video with no repercussions at all… we live (as others often have) in strange times.
Being convinced of disreality is a pervasive weapon that keeps being leveraged by the valent evil bad forces to make things worse and worse. Gladly tying the blindfold around your eyes should not be allowed to look as cool as this kind of post tries to exude.
Theres something so PKD about these fake realities, that have breached any and all containment, that people so readily deny any sense & sensibility. Just because. It's caused such huge disasters already. But it feels like still so many slumber on, that camp Wide Awake suffers so.
Brandolini's Law, the Bullshit Asymmetry Principle lurks below every reality based discussion, waiting for any chance to plunge thr pariticpants through to the unfathomable depths of unreality. It's a bitch of a structural advantage to be able to leave engagement and caring and discussion behind at any point, and plunge into that freezing alien other, to leave reality behind.
I wish i could just opt out of social security and invest the money myself. I'd pay the long term cap gains tax if this was an option, and I'd come out way ahead. The federal government can only mishandle money.
Maybe we need two systems:
1. You may move to be a certified responsible saver. You inherit all risk. But you opt out of the taxes. You must prove retirements assets are being contributed to.
2. Mandatory saving for everyone else (reading other countries, seems like this happens elsewhere). Money is pooled and invested into US companies. Investments must produce at least 8% return annually over 10 year rolling period or something, else corporate assets are forfeited (someone more saavy than I needs to figure that policy out).
Social security was created so that money collected day one could be distributed day one. Allowing people to opt out and invest the money is incompatible with the model as a whole.
It's like asking if you can save today's extra heartbeats for when you're older.
> I wish i could just opt out of social security and invest the money myself.
I'd like to emphasize that SS/OASDI is not an investment program in the first place, it is an insurance program. The two kinds cannot be directly compared, and have very different mechanics and features. You might already have known that, but the misconception is distressingly common in America--which I blame on misinformation from big-bank lobbyists.
> You inherit all risk. But you opt out of the taxes. You must prove retirements assets are being contributed to.
Is inheriting all the risk even possible? Suppose someone signs some dark legal contract in blood, like: "I refuse all public assistance, let me die in a ditch because I shall make my own fate."
What happens if they commit crime (perhaps out of desperation) and are sentenced to time in jail? Now there are three outcomes which all suck differently:
1. The government caves and supports them anyway with taxpayers funding their jail-food and jail-shelter. This distorts the original incentives, and recidivism is going to be a bitch.
2. They are let go, to commit more crimes? Locals won't stand for that.
3. They are indirectly executed by being forcibly exiled to a walled-off isolated place with no food and no shelter, as their families (quite reasonably) cry about the brutality on TV.
Then there's the issue of dependents, and mechanisms for fraud, and both of those are much bigger cans of worms than I want to open in this edit...
Can someone explain the legal structures in place in the US that make Social Security "run out"? Because it just sounds like deliberate indirection put in place by the government to cut funding for pensions?
In Australia, we have a universal, means-tested pension funded through consolidated revenue (i.e taxes). The pension can't "run out", because it is just a law that says that the government will pay you $X after you turn a particular age, if your assets are below a threshold. But if X were too high the Government would need to raise taxes, borrow money or print money to fund it, like all government spending.
Separately, we have superannuation - which I think is similar to 401k except compulsory for employers to pay 12% of your salary into, which are personal retirement savings held in trust to be released at your retirement, but generally these are account-based and in addition to the pension if you are eligible (i.e what you put in is what you get out).
There are older "defined benefits" superannuation funds where payouts aren't account-based (I think based on years of service in government roles or something like that) but they have been phased out to avoid the moral hazard of something government-adjacent having pension liabilities they cannot meet with their member's funds.
So what exactly is Social Security if it can run out? It sounds like a defined-benefits fund that is run by the government - in which case why has nobody closed it off to new members like Australia did when the writing was on the wall?
Social Security will not run out. It simply won't be taxing current workers enough to pay current retirees. This demographic problem was easily foreseen which is why there is a trust fund to "run out" to begin with. For quite some time social security operated in a surplus since there were many workers per retiree collecting benefits. Now we are around 3:1 workers:retirees and expected to drop to something like 2.2:1.
Where this gets confusing is that most folks seem to have the mental model that Social Security is a pension or some weird retirement account. It is not.
Social Security is simply a pay as you go means tested welfare program. It just means tests in a strange way. If you ended social security taxes today, the trust would run out in a few months and there would be $0 to pay retirees. It's current workers paying for current retirees. Social Security is simply an income tax like any other, but it's separated and marketed the way it is to purposefully make people think it's "their money" and make repealing it politically impossible.
It's just a means tested entitlement program funded by current tax receipts dressed up in fancy marketing. It functions much more similarly to SNAP (food aid) than it does a pension.
This is the confusing thing, the way it is described is like a hybrid of government welfare and a defined-benefit pension.
How can you simultaneously be "paying into" social security but also have describe it as current workers paying for current retirees?
The only way you really find out which one it is is what happens when it runs out of money - if the government backs it up to give you the full "entitlement" you paid into it, then you were in-fact "paying into it". But if they don't, or change the rules then it sounds like you were just being taxed.
> Is there any entitlements program that's not politically impossible to repeal?
> Taking away "free stuff", especially once people have come to rely on it, is a political nightmare no matter the structure.
Entitlements, namely Social Security, Medicare, VA benefits are (for the most part[1]) not "free stuff", they're programs that people paid into and so they're entitled to the benefits.
When you have a program where you say "work for 10 years and you'll get something when you hit retirement age" or "be in the military and qualify and we'll take care of you in various ways", taking that away should be a political nightmare. That said, the sooner you make changes, the smaller they have to be, and we're running out of time.
[1] There's some stuff in social security for people who have been permanently disabled since before they could work and establish eligibility.
As we saw with the whole DOGE fiasco, a substantial portion of the population would love to tear down current entitlement programs.
Social Security is (or was?) unique in that it was politically untouchable by either side of the aisle. No one was telling anyone they were running for office to cut social security benefits. Plenty run to say they will cut welfare spending.
Social security can 'run out', because it's setup with separate accounting. It's sort of designed that current year social security taxes pay for current year benefits ... in the 70s and 80s increases in taxes and decreases in benefits lead to a surplus of taxes collected which was held under the social security account. Since about 2009, income and costs have been pretty close and since about 2017, costs have consistently been more than income. 'social security runs out' when the accumulated funds have all been paid out.
If there's no other action, current law says benefits will be cut so that benefit payments don't exceed the tax income.
Closing social security off to new workers doesn't help, because current workers pay the bulk of current benefits.
There needs to either be additional funding (from general taxes or a rise in social security taxes) or a reduction in benefits. But nobody wants to do either of those, so chances are we'll get the default option.
On the plus side, I was a teen in the 1990s and my high school economics class suggested social security might not be wholy reliable, so we should separately save for retirement on our own. I estimate we'll have had at least 30 years of warning when benefits are cut, but likely many will still be taken by surprise, or will not have been able to prepare despite foreknowledge.
> Closing social security off to new workers doesn't help, because current workers pay the bulk of current benefits
You don't have to reduce the taxes. Just phase out the concept that you are paying into a retirement account and call a tax a tax. That means you don't calculate how much an individual receives based on the amount they input.
In Australia, we started a sovereign wealth fund[1] to cover the future liabilities from existing workers eligible for government defined-benefits pensions and closed them to new members. I guess that wouldn't make a lot of sense in the US though given the amount of government debt the US has.
Nowdays in Australia people just have accumulation accounts (super) and the backstop of the universal aged pension.
Active service in a recognised danger zone ups the pension rate and expands the health benefits (as does exposure to fallout - they like to medically track anyone touched by atomic testing).
Social security is funded through payroll taxes on employees and emloyers. The "run out" is in the sense of the amount of money going out exceeds that coming in and the saved funds have been depleted. In this sense, it can "run out" that the savings are depleted and the plan is cash flow negative.
The narrative and word choices are deliberate. Republicans want to get rid of Social Security. So the narrative is Social Security is fundamentally broken, and it can be silently ended through passive negligence without having to take responsibility for ending a popular entitlement. No matter that it was created with the expectation that Congress would periodically adjust the retirement age to keep it solvent, and that it was always intended to provide only a bare minimum benefit, just enough to keep you out of the poor house. Poor houses were real, common things back then, and what the "free market" will result in.
Social Security revenue and expenditures can easily be balanced in theory. But neither party wants to do the right thing--Democrats want to expand entitlements, and increasing the retirement age as originally designed is the opposite of their goal.
I don't quite understand what you mean the narrative here -- cash flow going negative is a fact. Attempts to discuss the COLA issues in 1970s-1980s [1] have failed. Attempts in the early aughts to divert funds by Bush Jr. [2] (long before I could even vote) were rejected in part because of skepticism stock returns would not perform well. And even today where we have additional tax breaks for seniors under the OBBA.
This has been a long running "heads we win tails you lose" with the older generations toying with the future dating back ~50+ years. Statements about "poor houses" don't mean very much when even uncapping the tax on wages for social security would only close ~61% of the gap [3]. Cuts are coming.
In the 1984 Social Security was in the same situation it was today. To balance things Congress (among other lesser measures) set a new schedule for bumping the retirement age, the last step of which only took effect recently. It's not a coincidence. It's been over 40 years since then; it had been 49 years between then and the creation of Social Security.
The narrative is that Social Security is broken because previous generations were idiots who didn't understand or care that lifespans would increase, yet chose to create a fundamentally unsustainable entitlement program anyhow. But lifespans are right on track today as expected in 1984, just like lifespans in 1984 were exactly where actuarial tables predicted them to be in 1935. And Congress in 1984 expected their successors to do today what the 1935 Congress expected of them. A program isn't fundamentally broken just because periodic maintenance is required. OTOH, in theory the 1935 Congress could have attempted to implement a perpetually self-healing, self-executing algorithm, as could have the 1984 Congress. They didn't because politics doesn't work that way; kicking the can down the road to a future Congress is typical, though kicking it 40-50 years down the road is pretty laudable, all things considered.
Obamacare did try to create a self-executing process to reevaluate costs, and it failed miserably, because it required perennially revisiting contentious points of policy, and to do so outside Congress. The president had the responsibility, but no accountability, because failure would be blamed on Congress, and the Democrats especially. In that light, the approach taken wrt Social Security seems prudent.
> This has been a long running "heads we win tails you lose" with the older generations toying with the future dating back ~50+ years
Yep. I call it the old eating their young. Society cannot exist in such a condition for very long. They will collect full benefits while paying in relatively less, and die before it becomes their problem.
And while Social Security is the big one everyone talks about, there are a whole lot of state and municipal level public pensions that are exceedingly underfunded. These come due at pretty much the same time. The problem was the same with those - workers at the time did not want to pay more taxes but wanted to enjoy the benefits that those current pensioners provided them. They borrowed from the future generations to do it.
The first key is that it isn't defined-benefits, in the sense that there is no account labeled "Bob Smith's Accumulated Retirement." Don't be disheartened though, because many Americans have the wrong idea too. [0 - See rant in footnote.]
In addition, the US has no constitutional barrier to protect it, the federal legislature can pass a regular law which completely rewrites the benefits however they like. It could be very unpopular, though.
> Can someone explain the legal structures [...]
It has grown a lot of bells and whistles over time, but at the core its formal original name of "Old-Age, Survivors, and Disability Insurance" is very informative.
* The premiums for coverage are collected as a tax on the working.
* Payout conditions broadly involve being alive and not able to earn enough to stay that way.
* If you pay in and then die young and healthy, you don't get anything. This is normal and intended, the same way that home fire insurance doesn't pay if your house is swept away by a tsunami.
* The program's surplus funds (from planned-for demographic shifts) is invested in bonds with the US government, meaning that there's an intra-governmental credit/debt going on, where OASDI/SS is the creditor and government-in-general is the debtor.
> [...] that make Social Security "run out"?
Most of the "run out" talk refers to a period of time where the invested surplus dwindles due to yet-more demographic shift, and cannot cover the difference between inflow and outflow. At that point one or both of these will have to happen:
(A) Congress passes a law increasing premiums/taxes on current workers
(B) Congress passes a law saying it's OK to pay less than the program did before.
Congress has been procrastinating on this for many decades.
__________
[0] I blame this on deliberate tactics by big-banks, and political groups ideologically opposed to the program. Private banks are unable to make big bucks offering a competing insurance plan, so instead they promote a false comparison. It goes like this:
1. They falsely assert that X% of the current surplus is somehow already exclusively "yours."
2. They claim that "your" money exists in a boring lame government retirement account which only invests in bonds. (Only half-true, in that the surplus is in bonds.)
3. They ask if you'd rather have the option of moving the money to a new account run by Big Bank, who is so much cooler will help you (for a modest fee) invest in stocks which go up much faster so "your" money will be zillions by the time you retire.
I've known I can't really rely on Social Security to exist when I retire, in any notable form, but man, this is so dark. And it's just a start.
(Edit: I'm not certain either way! But it seems like too great a risk to rely on. And the prognosis seems not great! I have heard for decades needs serious help, and nothing seems to change. More broadly, with a few exceptions, I've seen overwhelmingly obstructionism and destruction of America in lifetime.)
This isn’t what my financial advisor told me and I doubt many others would, either.
Social Security is almost certainly going to exist in some form. The question is how much retirees will get from it and how that compares to the cost of living.
Excessive cynicism is often dangerous because it converts the mundanely pleasant reality into an enthralling doom and gloom scenario.
Of course, I’m not really saying that everyone in America is going to have a wonderful retirement. But if you’re like the other software engineers on this forum and you’re maxing out your 401k and have a mortgage, you’re almost certainly going to have a pretty enviable retirement.
I completely recognize that. However, a lot of the voices of discontent and cynicism are living very comfortable lives in America relative to others.
Even having access to a flushing toilet and consistent electrical service are luxuries.
The US social safety net is only embarrassing by the standards of 30 or so of the most wealthy nations. Medicaid, Medicare, and social security, even in a diminished state, are programs that a lot of people lack.
Governments, when faced with shortfalls in the government pension, will absolutely nationalize your 401k or IRA.
YOU, while attempting to responsibly take care of yourself, will absolutely be a piggybank to be raided. This has happened in numerous countries.
You wouldn't want to be selfish, would you? Sure, you forgo the midlife crisis sports car in favor of the Toyota Corolla you've been driving for years, but that's just tough. Shoulda lived for the now.
It doesn’t even have to be raiding of accounts. They can modify rules of RMD to drive tax revenue or even entirely change the rules of 401k withdrawals such that if your balance is over a certain amount you pay an extra tax.
I don’t think it’s far fetched that 401ks of a certain value start to experience penalties to make up shortfalls. After all, the whole reason they would need to do this is because they failed on the promise of social security. Why not fail on the promise of the 401k?
1. It upsets the most influential voting demographics. I struggle to find any national policy implemented in the last few decades that has truly disrupted the kind of upper middle class voter that has a lot of money in a 401k.
2. If you tax 401ks higher than long term capital gains tax then higher earners just won’t use 401ks/IRAs.
3. 401ks and IRAs are completely detached from the way social security is funded so they aren’t even really the most logical place you would go to fund social security. E.g., why not just raise the social security payroll tax?
5. It’s less logical to do this than to remove the social security tax cap.
> I struggle to find any national policy implemented in the last few decades that has truly disrupted the kind of upper middle class voter that has a lot of money in a 401k.
Capping SALT deductions was a big one. For upper middle class folks in HCOL cities this is tens of thousands of dollars of additional taxes being paid.
> If you tax 401ks higher than long term capital gains tax then higher earners just won’t use 401ks/IRAs.
How does that help those who funded a 401k/IRA during their working career? Sure, new earners won't use them but that doesn't help you very much if you're retired. I also don't think it would be more than long term capital gains, it would first start as a very small "reasonable" tax on the top "rich folks" accounts and slide upwards from there like nearly all taxes do.
Totally agree on points 3 and 5, but I absolutely expect my tax advantaged retirement accounts to become less advantaged than they are today by the time I'm drawing on them. You have to collect revenue from where the money is, and with all the talk about "wealth taxes" I predict will eventually hit 401k/IRA accounts as well. I bet it will be politically very popular to add a 5% tax on withdrawals from "millionaire" retirement accounts. Most folks have very little concern over the upper middle classes $3m brokerage account being taxed regardless of account type.
Yeah, the SALT cap is probably the most prominent example. Perhaps even the only example.
Maybe this idea is too much of a stretch, but something to point out with the SALT cap change is that it’s arguably a partisan tax shift for middle class people who live in blue states with higher property values. The tax cut and jobs act was partisan legislation passed by one party with no support across the aisle.
Upper middle class people in red states with less valuable property still experienced an overall tax cut with the same law. I think this legislation was written with the intention of shifting the tax burden from the right to the left, and to make blue states look less attractive.
I’ve conversely seen tax advantaged accounts become more tax advantaged over time. For example, 529 accounts have gained more spend flexibility and the ability to transfer funds to beneficiary Roth IRAs. Dependent care FSA recently had a very significant contribution cap increase.
Still, I don’t disagree with the idea that we should expect our tax-advantaged accounts to eventually be less tax-advantaged, although I think it would be less abrasive for that to be accomplished by slowing down contribution limit increases compared to inflation, or by modifying the underlying tax brackets themselves.
Honestly, the reporting has looked the same around this since the 1980s. I've read books from them referencing how Social Security was going to be bankrupt by the 90s, or the 2000s. The fact is that older people vote way more than younger people, so it stays funded; we will at worst pay for some of it out of income taxes.
The date was always in the 2030-2040 range since I started reading about it in the 90's. At my first job I planned my retirement around the trust fund running out by the time I retired, and benefits being cut passively via cost of living not matching inflation.
This is largely due to congress actually taking action in the early 80's, which pushed this date back to the current 2030ish estimate. As the date draws nearer, it gets more refined. If they had not taken action, those previous articles would have been correct.
If congress had done their jobs and done another round of reformation 20 years later in around 2003 we would not be having this discussion now. The date would have either been pushed back or eliminated. It was exceedingly clear what was going to happen back then if no action was taken, and those workers simply did not vote for folks who were going to raise taxes (or reduce benefits) for them. Collectively speaking they would rather have their children pay instead.
From my standpoint the reporting has been very consistent on the subject. It's pretty easy math to report on.
The math has been constant, if you were reading reports saying it would hit the breaking point in the 90s or 2000s, you are either misremembering, confusing it with something else, or willfully distorting facts. Anyways, if you make claims like that you should take advantage of internet linking features and just provide your evidence directly vs a “I remember reading” anecdote.
There was a point where social security went from surplus to deficit in 2010. That wasn’t insolvency though since the federal government owed them for the previous surpluses they borrowed. 2033 is when the federal government no longer has to pay back money to SS and it is truly insolvent.
The date used to be later but COVID drove it forward a bit since they got rid of contributions for some people for a couple of years I think? Generous cost of living increases have also caused the date to creep forward, but I don’t think it has ever moved backward.
As others have pointed out, the date has long been mid/early 2030s.
You may be remembering that it’s been a hotly debated issue since the 80s.
I distinctly remember it being a massive election issue in 2000 between Gore and Bush (the first election I’m old enough to remember in detail). It was the whole “lockbox” vs government funding of private accounts debate.
Imagine my surprise when I realized just a few months ago that I was now old enough to apply for social security.
Younger, blue-collar-raised me thought I should hold out on applying for social security until I was 70 so as to get the largest monthly payout.
Older, hopefully-wiser me (who has since learned about investing) applied for social security immediately and will stash the disbursements into an index fund until I actually need them.
(I'm oversimplifying because there are other factors to consider, but generally, historic returns on the stock market suggest you'll have more by age 70 by investing he disbursements when you're 62 than social security would have paid out if you had waited until 70.)
(Wild to imagine a system that was put in place that requires the recipient to guess how long they think they're going to live and choose when to start payments. Some kind of personal prediction market of one…)
The wife was on board my starting at age 62 simply because of talk of social security solvency issues like the headline.
Yes, and the sky may fall tomorrow. The longer I live the more I read these sensationalist headlines designed to gin up angst and antagonize people's peace of mind.
Social Security's solvency has been the subject of much debate, but clearer heads point toward a graduation of the current system to include higher earners. That will accommodate the large aging population's demand. Case closed, easy peasy lemon squeezy.
Famously, America has shown to be exceptionally skilled at getting the rich to help pay for society they sit on top of.
It's hard to tell whether this is sarcastic, because like the safety of nuclear energy, it's literally true but few people believe it.
No it isn’t. Not since the 80s at least.
If nothing is done it’s a mathematical fact. The problem is that there are no plans to do anything yet, each administration and congress seeing it as too politically volatile to deal with, which means we will have a last minute suboptimal solution.
Obviously there are solutions. Maybe if America survives that long we might see one implemented.
Sure, if nothing is done. The trust fund redeeming its bonds is little different than the congress appropriating money for Social Security benefits; both come out of the current revenue of the USG. When the trust fund no longer has any bonds to redeem, there's nothing stopping congress from continuing to transfer money into Social Security to pay benefits at existing levels. They'll just have to vote on it rather than it happening automatically.
2033 is when all the bonds should have been redeemed and there is no money left to redeem, just contributions coming in and more payments going out. And yes, congress can do a straight injection from the general fund, it’s just even more deficit spending at that point.
The hole can be filled overnight by just raising the retirement age.
And if you normalize for longer lifespans, it's perfectly reasonable.
Great, so everyone in their 60s works for a decade more, as their health declines, and everyone under 60 has to deal with the increased unemployment that would cause.
It would be better to just get rid of the loophole for the rentier class (The FICA cap at $186,000), and this actually would be solved.
People are living longer sure, but are they fit for work longer?
Or just living longer with dementia and stuff?
Ya, there are wide different outcomes to consider with respect to health. Also people should really be retiring earlier, not later, as automation picks up. The way things are progressing right now are just whack.
Personally I watched my Grandpa wither away from Parkinsons and eventually Alzheimer's for over a decade, starting only a couple of years after he retired. He spent most of his retired life in hospice care not recognizing his children or grandchildren.
Knowing that is likely my eventual fate too, I really don't want to wait to the last possible minute to retire.
It's a huge shame we can't accurately predict future illnesses and such, we could plan so much more effectively. As it stands we have to do our best and live good lives before we aren't capable of that anymore. Many people won't have a nice retirement. Many won't even live that long in the first place. Society can probably do better for everyone than we currently do
The sad thing is that those people who need social security the most usually have it for the least amount of time. Obviously are priorities suck.
A quick check (ie, letting ChatGPT do the math) shows that if all caps on taxation was eliminated, it would help, but not solve the problem completely.
I never imagined that, in my lifetime, Roe would be overturned or that entirely untrained federal thugs would be allowed to murder people on video with no repercussions at all… we live (as others often have) in strange times.
This is fantasy. There's nowhere for the money to come from. They're going to raise the age, reduce benefits.
Tax rates could be raised, especially on the wealthy, who enjoy historically low tax rates.
Being convinced of disreality is a pervasive weapon that keeps being leveraged by the valent evil bad forces to make things worse and worse. Gladly tying the blindfold around your eyes should not be allowed to look as cool as this kind of post tries to exude.
Theres something so PKD about these fake realities, that have breached any and all containment, that people so readily deny any sense & sensibility. Just because. It's caused such huge disasters already. But it feels like still so many slumber on, that camp Wide Awake suffers so.
Brandolini's Law, the Bullshit Asymmetry Principle lurks below every reality based discussion, waiting for any chance to plunge thr pariticpants through to the unfathomable depths of unreality. It's a bitch of a structural advantage to be able to leave engagement and caring and discussion behind at any point, and plunge into that freezing alien other, to leave reality behind.
I wish i could just opt out of social security and invest the money myself. I'd pay the long term cap gains tax if this was an option, and I'd come out way ahead. The federal government can only mishandle money.
Maybe we need two systems:
1. You may move to be a certified responsible saver. You inherit all risk. But you opt out of the taxes. You must prove retirements assets are being contributed to.
2. Mandatory saving for everyone else (reading other countries, seems like this happens elsewhere). Money is pooled and invested into US companies. Investments must produce at least 8% return annually over 10 year rolling period or something, else corporate assets are forfeited (someone more saavy than I needs to figure that policy out).
Social security was created so that money collected day one could be distributed day one. Allowing people to opt out and invest the money is incompatible with the model as a whole.
It's like asking if you can save today's extra heartbeats for when you're older.
> I wish i could just opt out of social security and invest the money myself.
I'd like to emphasize that SS/OASDI is not an investment program in the first place, it is an insurance program. The two kinds cannot be directly compared, and have very different mechanics and features. You might already have known that, but the misconception is distressingly common in America--which I blame on misinformation from big-bank lobbyists.
> You inherit all risk. But you opt out of the taxes. You must prove retirements assets are being contributed to.
Is inheriting all the risk even possible? Suppose someone signs some dark legal contract in blood, like: "I refuse all public assistance, let me die in a ditch because I shall make my own fate."
What happens if they commit crime (perhaps out of desperation) and are sentenced to time in jail? Now there are three outcomes which all suck differently:
1. The government caves and supports them anyway with taxpayers funding their jail-food and jail-shelter. This distorts the original incentives, and recidivism is going to be a bitch.
2. They are let go, to commit more crimes? Locals won't stand for that.
3. They are indirectly executed by being forcibly exiled to a walled-off isolated place with no food and no shelter, as their families (quite reasonably) cry about the brutality on TV.
Then there's the issue of dependents, and mechanisms for fraud, and both of those are much bigger cans of worms than I want to open in this edit...
Can someone explain the legal structures in place in the US that make Social Security "run out"? Because it just sounds like deliberate indirection put in place by the government to cut funding for pensions?
In Australia, we have a universal, means-tested pension funded through consolidated revenue (i.e taxes). The pension can't "run out", because it is just a law that says that the government will pay you $X after you turn a particular age, if your assets are below a threshold. But if X were too high the Government would need to raise taxes, borrow money or print money to fund it, like all government spending.
Separately, we have superannuation - which I think is similar to 401k except compulsory for employers to pay 12% of your salary into, which are personal retirement savings held in trust to be released at your retirement, but generally these are account-based and in addition to the pension if you are eligible (i.e what you put in is what you get out).
There are older "defined benefits" superannuation funds where payouts aren't account-based (I think based on years of service in government roles or something like that) but they have been phased out to avoid the moral hazard of something government-adjacent having pension liabilities they cannot meet with their member's funds.
So what exactly is Social Security if it can run out? It sounds like a defined-benefits fund that is run by the government - in which case why has nobody closed it off to new members like Australia did when the writing was on the wall?
Social Security will not run out. It simply won't be taxing current workers enough to pay current retirees. This demographic problem was easily foreseen which is why there is a trust fund to "run out" to begin with. For quite some time social security operated in a surplus since there were many workers per retiree collecting benefits. Now we are around 3:1 workers:retirees and expected to drop to something like 2.2:1.
Where this gets confusing is that most folks seem to have the mental model that Social Security is a pension or some weird retirement account. It is not.
Social Security is simply a pay as you go means tested welfare program. It just means tests in a strange way. If you ended social security taxes today, the trust would run out in a few months and there would be $0 to pay retirees. It's current workers paying for current retirees. Social Security is simply an income tax like any other, but it's separated and marketed the way it is to purposefully make people think it's "their money" and make repealing it politically impossible.
It's just a means tested entitlement program funded by current tax receipts dressed up in fancy marketing. It functions much more similarly to SNAP (food aid) than it does a pension.
This is the confusing thing, the way it is described is like a hybrid of government welfare and a defined-benefit pension.
How can you simultaneously be "paying into" social security but also have describe it as current workers paying for current retirees?
The only way you really find out which one it is is what happens when it runs out of money - if the government backs it up to give you the full "entitlement" you paid into it, then you were in-fact "paying into it". But if they don't, or change the rules then it sounds like you were just being taxed.
Is there any entitlements program that's not politically impossible to repeal?
Taking away "free stuff", especially once people have come to rely on it, is a political nightmare no matter the structure.
> Is there any entitlements program that's not politically impossible to repeal?
> Taking away "free stuff", especially once people have come to rely on it, is a political nightmare no matter the structure.
Entitlements, namely Social Security, Medicare, VA benefits are (for the most part[1]) not "free stuff", they're programs that people paid into and so they're entitled to the benefits.
When you have a program where you say "work for 10 years and you'll get something when you hit retirement age" or "be in the military and qualify and we'll take care of you in various ways", taking that away should be a political nightmare. That said, the sooner you make changes, the smaller they have to be, and we're running out of time.
[1] There's some stuff in social security for people who have been permanently disabled since before they could work and establish eligibility.
As we saw with the whole DOGE fiasco, a substantial portion of the population would love to tear down current entitlement programs.
Social Security is (or was?) unique in that it was politically untouchable by either side of the aisle. No one was telling anyone they were running for office to cut social security benefits. Plenty run to say they will cut welfare spending.
Social security can 'run out', because it's setup with separate accounting. It's sort of designed that current year social security taxes pay for current year benefits ... in the 70s and 80s increases in taxes and decreases in benefits lead to a surplus of taxes collected which was held under the social security account. Since about 2009, income and costs have been pretty close and since about 2017, costs have consistently been more than income. 'social security runs out' when the accumulated funds have all been paid out.
If there's no other action, current law says benefits will be cut so that benefit payments don't exceed the tax income.
Closing social security off to new workers doesn't help, because current workers pay the bulk of current benefits.
There needs to either be additional funding (from general taxes or a rise in social security taxes) or a reduction in benefits. But nobody wants to do either of those, so chances are we'll get the default option.
On the plus side, I was a teen in the 1990s and my high school economics class suggested social security might not be wholy reliable, so we should separately save for retirement on our own. I estimate we'll have had at least 30 years of warning when benefits are cut, but likely many will still be taken by surprise, or will not have been able to prepare despite foreknowledge.
> Closing social security off to new workers doesn't help, because current workers pay the bulk of current benefits
You don't have to reduce the taxes. Just phase out the concept that you are paying into a retirement account and call a tax a tax. That means you don't calculate how much an individual receives based on the amount they input.
In Australia, we started a sovereign wealth fund[1] to cover the future liabilities from existing workers eligible for government defined-benefits pensions and closed them to new members. I guess that wouldn't make a lot of sense in the US though given the amount of government debt the US has.
Nowdays in Australia people just have accumulation accounts (super) and the backstop of the universal aged pension.
[1] https://en.wikipedia.org/wiki/Future_Fund
> I think based on years of service in government roles or something like that
More or less, with qualifications and levels of degree.
Eg: Was the Second Malayan Emergency active or "peacetime": https://www.abc.net.au/news/2026-07-12/rifle-company-butterw...
Active service in a recognised danger zone ups the pension rate and expands the health benefits (as does exposure to fallout - they like to medically track anyone touched by atomic testing).
Social security is funded through payroll taxes on employees and emloyers. The "run out" is in the sense of the amount of money going out exceeds that coming in and the saved funds have been depleted. In this sense, it can "run out" that the savings are depleted and the plan is cash flow negative.
The narrative and word choices are deliberate. Republicans want to get rid of Social Security. So the narrative is Social Security is fundamentally broken, and it can be silently ended through passive negligence without having to take responsibility for ending a popular entitlement. No matter that it was created with the expectation that Congress would periodically adjust the retirement age to keep it solvent, and that it was always intended to provide only a bare minimum benefit, just enough to keep you out of the poor house. Poor houses were real, common things back then, and what the "free market" will result in.
Social Security revenue and expenditures can easily be balanced in theory. But neither party wants to do the right thing--Democrats want to expand entitlements, and increasing the retirement age as originally designed is the opposite of their goal.
I don't quite understand what you mean the narrative here -- cash flow going negative is a fact. Attempts to discuss the COLA issues in 1970s-1980s [1] have failed. Attempts in the early aughts to divert funds by Bush Jr. [2] (long before I could even vote) were rejected in part because of skepticism stock returns would not perform well. And even today where we have additional tax breaks for seniors under the OBBA.
This has been a long running "heads we win tails you lose" with the older generations toying with the future dating back ~50+ years. Statements about "poor houses" don't mean very much when even uncapping the tax on wages for social security would only close ~61% of the gap [3]. Cuts are coming.
[1] See for example this hill (https://thehill.com/opinion/finance/4258578-the-day-the-soci...) article discussing he issue [2] https://www.brookings.edu/articles/bushs-shaky-retirement-pl... [3] https://www.crfb.org/socialsecurityreformer/
In the 1984 Social Security was in the same situation it was today. To balance things Congress (among other lesser measures) set a new schedule for bumping the retirement age, the last step of which only took effect recently. It's not a coincidence. It's been over 40 years since then; it had been 49 years between then and the creation of Social Security.
The narrative is that Social Security is broken because previous generations were idiots who didn't understand or care that lifespans would increase, yet chose to create a fundamentally unsustainable entitlement program anyhow. But lifespans are right on track today as expected in 1984, just like lifespans in 1984 were exactly where actuarial tables predicted them to be in 1935. And Congress in 1984 expected their successors to do today what the 1935 Congress expected of them. A program isn't fundamentally broken just because periodic maintenance is required. OTOH, in theory the 1935 Congress could have attempted to implement a perpetually self-healing, self-executing algorithm, as could have the 1984 Congress. They didn't because politics doesn't work that way; kicking the can down the road to a future Congress is typical, though kicking it 40-50 years down the road is pretty laudable, all things considered.
Obamacare did try to create a self-executing process to reevaluate costs, and it failed miserably, because it required perennially revisiting contentious points of policy, and to do so outside Congress. The president had the responsibility, but no accountability, because failure would be blamed on Congress, and the Democrats especially. In that light, the approach taken wrt Social Security seems prudent.
> This has been a long running "heads we win tails you lose" with the older generations toying with the future dating back ~50+ years
Yep. I call it the old eating their young. Society cannot exist in such a condition for very long. They will collect full benefits while paying in relatively less, and die before it becomes their problem.
And while Social Security is the big one everyone talks about, there are a whole lot of state and municipal level public pensions that are exceedingly underfunded. These come due at pretty much the same time. The problem was the same with those - workers at the time did not want to pay more taxes but wanted to enjoy the benefits that those current pensioners provided them. They borrowed from the future generations to do it.
> It sounds like a defined-benefits fund
The first key is that it isn't defined-benefits, in the sense that there is no account labeled "Bob Smith's Accumulated Retirement." Don't be disheartened though, because many Americans have the wrong idea too. [0 - See rant in footnote.]
In addition, the US has no constitutional barrier to protect it, the federal legislature can pass a regular law which completely rewrites the benefits however they like. It could be very unpopular, though.
> Can someone explain the legal structures [...]
It has grown a lot of bells and whistles over time, but at the core its formal original name of "Old-Age, Survivors, and Disability Insurance" is very informative.
* The premiums for coverage are collected as a tax on the working.
* Payout conditions broadly involve being alive and not able to earn enough to stay that way.
* If you pay in and then die young and healthy, you don't get anything. This is normal and intended, the same way that home fire insurance doesn't pay if your house is swept away by a tsunami.
* The program's surplus funds (from planned-for demographic shifts) is invested in bonds with the US government, meaning that there's an intra-governmental credit/debt going on, where OASDI/SS is the creditor and government-in-general is the debtor.
> [...] that make Social Security "run out"?
Most of the "run out" talk refers to a period of time where the invested surplus dwindles due to yet-more demographic shift, and cannot cover the difference between inflow and outflow. At that point one or both of these will have to happen:
(A) Congress passes a law increasing premiums/taxes on current workers
(B) Congress passes a law saying it's OK to pay less than the program did before.
Congress has been procrastinating on this for many decades.
__________
[0] I blame this on deliberate tactics by big-banks, and political groups ideologically opposed to the program. Private banks are unable to make big bucks offering a competing insurance plan, so instead they promote a false comparison. It goes like this:
1. They falsely assert that X% of the current surplus is somehow already exclusively "yours."
2. They claim that "your" money exists in a boring lame government retirement account which only invests in bonds. (Only half-true, in that the surplus is in bonds.)
3. They ask if you'd rather have the option of moving the money to a new account run by Big Bank, who is so much cooler will help you (for a modest fee) invest in stocks which go up much faster so "your" money will be zillions by the time you retire.
"If we do nothing about this obvious problem for the next decade it will be catastrophic."
Ok
I've known I can't really rely on Social Security to exist when I retire, in any notable form, but man, this is so dark. And it's just a start.
(Edit: I'm not certain either way! But it seems like too great a risk to rely on. And the prognosis seems not great! I have heard for decades needs serious help, and nothing seems to change. More broadly, with a few exceptions, I've seen overwhelmingly obstructionism and destruction of America in lifetime.)
This isn’t what my financial advisor told me and I doubt many others would, either.
Social Security is almost certainly going to exist in some form. The question is how much retirees will get from it and how that compares to the cost of living.
Excessive cynicism is often dangerous because it converts the mundanely pleasant reality into an enthralling doom and gloom scenario.
Of course, I’m not really saying that everyone in America is going to have a wonderful retirement. But if you’re like the other software engineers on this forum and you’re maxing out your 401k and have a mortgage, you’re almost certainly going to have a pretty enviable retirement.
Indeed. The worst case scenario with no action is a ~30% cut in benefits; that's a long way from a 100% benefit cut.
> the mundanely pleasant reality
There are a shocking number of people who do not experience anything resembling a mundanely pleasant reality
Those of us who do are extremely fortunate
I completely recognize that. However, a lot of the voices of discontent and cynicism are living very comfortable lives in America relative to others.
Even having access to a flushing toilet and consistent electrical service are luxuries.
The US social safety net is only embarrassing by the standards of 30 or so of the most wealthy nations. Medicaid, Medicare, and social security, even in a diminished state, are programs that a lot of people lack.
It's much worse than that.
Governments, when faced with shortfalls in the government pension, will absolutely nationalize your 401k or IRA.
YOU, while attempting to responsibly take care of yourself, will absolutely be a piggybank to be raided. This has happened in numerous countries.
You wouldn't want to be selfish, would you? Sure, you forgo the midlife crisis sports car in favor of the Toyota Corolla you've been driving for years, but that's just tough. Shoulda lived for the now.
This is just wild hyperbole.
Yes, tax rates might go up. You should actually bet on that because tax rates are at a pretty low level historically.
But this concept of nationalizing private bank accounts is pretty extreme.
It doesn’t even have to be raiding of accounts. They can modify rules of RMD to drive tax revenue or even entirely change the rules of 401k withdrawals such that if your balance is over a certain amount you pay an extra tax.
I don’t think it’s far fetched that 401ks of a certain value start to experience penalties to make up shortfalls. After all, the whole reason they would need to do this is because they failed on the promise of social security. Why not fail on the promise of the 401k?
It’s far-fetched for a number of reasons:
1. It upsets the most influential voting demographics. I struggle to find any national policy implemented in the last few decades that has truly disrupted the kind of upper middle class voter that has a lot of money in a 401k.
2. If you tax 401ks higher than long term capital gains tax then higher earners just won’t use 401ks/IRAs.
3. 401ks and IRAs are completely detached from the way social security is funded so they aren’t even really the most logical place you would go to fund social security. E.g., why not just raise the social security payroll tax?
5. It’s less logical to do this than to remove the social security tax cap.
> I struggle to find any national policy implemented in the last few decades that has truly disrupted the kind of upper middle class voter that has a lot of money in a 401k.
Capping SALT deductions was a big one. For upper middle class folks in HCOL cities this is tens of thousands of dollars of additional taxes being paid.
> If you tax 401ks higher than long term capital gains tax then higher earners just won’t use 401ks/IRAs.
How does that help those who funded a 401k/IRA during their working career? Sure, new earners won't use them but that doesn't help you very much if you're retired. I also don't think it would be more than long term capital gains, it would first start as a very small "reasonable" tax on the top "rich folks" accounts and slide upwards from there like nearly all taxes do.
Totally agree on points 3 and 5, but I absolutely expect my tax advantaged retirement accounts to become less advantaged than they are today by the time I'm drawing on them. You have to collect revenue from where the money is, and with all the talk about "wealth taxes" I predict will eventually hit 401k/IRA accounts as well. I bet it will be politically very popular to add a 5% tax on withdrawals from "millionaire" retirement accounts. Most folks have very little concern over the upper middle classes $3m brokerage account being taxed regardless of account type.
Yeah, the SALT cap is probably the most prominent example. Perhaps even the only example.
Maybe this idea is too much of a stretch, but something to point out with the SALT cap change is that it’s arguably a partisan tax shift for middle class people who live in blue states with higher property values. The tax cut and jobs act was partisan legislation passed by one party with no support across the aisle.
Upper middle class people in red states with less valuable property still experienced an overall tax cut with the same law. I think this legislation was written with the intention of shifting the tax burden from the right to the left, and to make blue states look less attractive.
I’ve conversely seen tax advantaged accounts become more tax advantaged over time. For example, 529 accounts have gained more spend flexibility and the ability to transfer funds to beneficiary Roth IRAs. Dependent care FSA recently had a very significant contribution cap increase.
Still, I don’t disagree with the idea that we should expect our tax-advantaged accounts to eventually be less tax-advantaged, although I think it would be less abrasive for that to be accomplished by slowing down contribution limit increases compared to inflation, or by modifying the underlying tax brackets themselves.
Wrong.
https://politics.stackexchange.com/questions/20203/why-would...
This seems like it’s a completely different style of system to the point where it’s not comparable.
Honestly, the reporting has looked the same around this since the 1980s. I've read books from them referencing how Social Security was going to be bankrupt by the 90s, or the 2000s. The fact is that older people vote way more than younger people, so it stays funded; we will at worst pay for some of it out of income taxes.
The date was always in the 2030-2040 range since I started reading about it in the 90's. At my first job I planned my retirement around the trust fund running out by the time I retired, and benefits being cut passively via cost of living not matching inflation.
This is largely due to congress actually taking action in the early 80's, which pushed this date back to the current 2030ish estimate. As the date draws nearer, it gets more refined. If they had not taken action, those previous articles would have been correct.
If congress had done their jobs and done another round of reformation 20 years later in around 2003 we would not be having this discussion now. The date would have either been pushed back or eliminated. It was exceedingly clear what was going to happen back then if no action was taken, and those workers simply did not vote for folks who were going to raise taxes (or reduce benefits) for them. Collectively speaking they would rather have their children pay instead.
From my standpoint the reporting has been very consistent on the subject. It's pretty easy math to report on.
The math has been constant, if you were reading reports saying it would hit the breaking point in the 90s or 2000s, you are either misremembering, confusing it with something else, or willfully distorting facts. Anyways, if you make claims like that you should take advantage of internet linking features and just provide your evidence directly vs a “I remember reading” anecdote.
There was a point where social security went from surplus to deficit in 2010. That wasn’t insolvency though since the federal government owed them for the previous surpluses they borrowed. 2033 is when the federal government no longer has to pay back money to SS and it is truly insolvent.
Exactly this. The date has been very consistent for many years, and the math checks out. 2033 unless something significant changes.
The date used to be later but COVID drove it forward a bit since they got rid of contributions for some people for a couple of years I think? Generous cost of living increases have also caused the date to creep forward, but I don’t think it has ever moved backward.
As others have pointed out, the date has long been mid/early 2030s.
You may be remembering that it’s been a hotly debated issue since the 80s.
I distinctly remember it being a massive election issue in 2000 between Gore and Bush (the first election I’m old enough to remember in detail). It was the whole “lockbox” vs government funding of private accounts debate.