Social Security has long been promised to be a way for the average worker to retire in comfort and maintain their standard of living even after they stop earning (even the name “Social Security” implies that), but can you really depend on it, or any other government run program, to keep you and your family out of the poor house and away from soup kitchens when you retire?
From Peter Reagan for Birch Gold Group
Many Americans have grown up with a bland sort of indifference toward their futures. They go to school, go to work and into their retirement simply assuming that everything will somehow work out. They avoid thinking about the details of the future, exactly how everything will work out for them. Should something go wrong, they assume they’ll be taken care of.
That’s why we have Social Security in the first place, right?
That’s why working Americans, and their employers, each pay a 6.2% tax (12.4% total) on every paycheck. These tax payments go into the Social Security Trust Fund.
It’s tempting to think of Social Security the way we think of a 401(k). Except in this case, everyone who has a job is automatically enrolled. There’s no opting out. Oh, and you can’t direct your contributions. “Your” money goes into the same pot as everyone else’s. At that point, it ceases to be your money. It becomes Social Security’s money:
In fact, the taxes the retirees paid when they were working have already been spent—virtually the same day they were collected. Nothing was saved for the future.
Originally, Social Security was a promise to the average worker that they’d be able to retire in comfort someday and maintain their standard of living. Even after they stop earning. Even the name “Social Security” implies that!
Times have changed, and Social Security is far from secure.
Can you really depend on Social Security (or any other government program, for that matter) to keep you and your family out of homeless shelters and soup kitchens when you retire?
Well, that’s what Social Security is for. And if there were really problems, the government would fix it.
After all, that’s what they have elected officials for, right?
Can you depend on the government to take care of you?
The problem with much of this thinking is the assumption that the government is willing and able to:
- Work in your best interests
- Actually solve the problem
Even if we assume good intentions on the part of all politicians and bureaucrats, there are very real constraints on what they can and cannot do. Furthermore, in the case that they in fact cannot solve the problem, it’s in their best interests to mislead us about the scope of the challenge. (Because that’s how you get reelected.)
For example, it’s an open secret that there are nowhere near enough funds in the Social Security Trust to meet its obligations. There’s no cohesive plan to fix the problem, either. Because the obvious solutions are either:
- Raise taxes, charging workers more to pay benefits to today’s retirees
- Cut benefits, defaulting on the promise to today’s (and tomorrow’s) retirees
Considering we’re all opted in, we’re all paying for Social Security, the current situation is not just the government’s problem to solve. It’s ours, too.
A summary of the current situation described by USA Today reporter Medora Lee:
“[A] typical dual-income couple is estimated to lose [$16,500 in income a year] in Social Security benefits if they retire when the Social Security Old-Age and Survivors Insurance (OASI) trust fund is depleted in 2033, the nonprofit, nonpartisan Committee for a Responsible Federal Budget (CRFB) said in a new report. A typical single-income couple would lose $12,400, it said.
“Since Social Security is paying out more benefits than it’s collecting in payroll tax and other revenue, the program is drawing down its reserves in the OASI trust fund to cover the remaining cost of benefits. The fund has enough reserves to cover 100% of benefits until the fund’s reserves are depleted in 2033. When that happens, the law limits benefits to incoming revenue, which essentially mandates a 21% across-the-board benefit cut for the program’s 70 million beneficiaries, CRFB said.”
For most people I know, losing $1,375 a month would really put a strain on their finances. That could, quite literally, mean the difference between buying their prescriptions that month or not. Between paying for car insurance or canceling the policy and then just driving carefully, hoping for the best…
This is not a future any of us want.
Inflation compounds the affordability crisis
Even assuming that the Social Security fund will somehow have the money to keep paying out in full until 2030, they still have to issue cost of living adjustments (COLA) to, ideally, maintain the purchasing power of benefits checks. Those depending on a fixed income (whether from Social Security or not) suffer the most from inflation.
Will those adjustments keep up, though?
Detroit Free Press reporter Susan Tompor notes:
The Senior Citizens League, a nonpartisan advocacy group, issued the 2.57% estimate shortly after the July inflation data was released by the U.S. Bureau of Labor Statistics on Aug. 14.
Mark Zandi, chief economist for Moody’s, said Moody’s is estimating a 2.6% COLA increase, which is in line with the Senior Citizens League’s figure.
I don’t know about you, but the official inflation rate feels much higher than 2.57%. That means that a cost of living adjustment of just 2.57% doesn’t begin to keep up with the difference in many people’s grocery store bills.
And the grocery store bill (to just take one example) is likely to only be even worse for those who are retired as they may be more likely to have specialized dietary restrictions for health reasons.
Just how concerned should we be?
More and more Americans who have thought about it are worried about whether Social Security will be enough to keep a roof over their heads and food on the table when they reach retirement.
In fact, Caitlin Cahalan notes that “most Americans are worried [Social Security] will collapse before they can cash in” and a study by Atticus, a law firm specializing in helping clients receive government insurance and benefits, “found that many Americans are proactively adjusting their finances in anticipation of reduced payments.”
And it’s not just the study from Atticus that shows that people are worried. According to a Wall Street Journal column by Joe Pinsker, “Younger [workers] doubt they will get a dime when they retire.”
Proactively adjusting our finances in anticipation of reduced payments
Fortunately for you, while government planning may not be able to solve this problem for you, you still have the ability to take matters into your own hands and to look for ways to maintain your purchasing power in retirement.
How? By ensuring your nest egg protects you from a failure of Social Security.
And, historically, one of the best ways to do that is by diversifying into inflation-resistant assets, including physical gold, to maintain purchasing power well into your retirement years.
You can find out more about diversifying your savings with physical precious metals to see if it is right for you, and you can, also, request your own 2024 Precious Metals Information Kit or call us toll-free at (877) 749-7738 to find out more.
Whether or not you reach out to Birch Gold to prepare yourself for the future, please take steps now. I do not believe we can rely on the federal government to solve this problem for us.