Retirement Crisis: Where Did Our Money Go?

From Peter Reagan for Birch Gold Group

Social Security and Medicare benefit programs are in big financial trouble, and have been for quite some time.

The recent 254-page report issued by the Treasury Department revealed the most-current summary of the incredible shortfalls that the Trust Fund is suffering:

Take note of the fact that according to this report, Medicare could start to recover somewhat, but it wouldn’t approach that recovery for almost 73 years.

Unfortunately, the OASDI benefit (that pays the monthly “check”) doesn’t appear like it would recover at all, assuming lawmakers continued with “business as usual.” It would suffer a 20% reduction in benefits by 2034, then decrease even further by 2097.

These updates further confirm what we’ve already shed light on before:

• If Social Security were a bank, it would become insolvent.
• The truth is, the money you put into the program through payroll taxes is spent before you retire. That means the money isn’t even yours.
• If the program were an “investment,” there would be endless lawsuits.

With all of this in mind, here’s a question to ponder…

The inevitable retirement crisis just around the corner

The same Treasury report that provided the most current update about the Trust Fund also revealed another incredible fact…

Social Security and Medicare are massively underfunded, and politicians have been using the Trust like a piggy bank for quite some time:

U.S. Treasury Secretary, Janet Yellen, casts long shadows over the prospect of a secure retirement. According to the latest financial report released by the United States government, Social Security and Medicare face a staggering underfunding of $175 trillion. To put that into perspective, that amounts to approximately $1.4 million per household, dwarfing the median household net worth in the U.S., which stands at a mere fraction of this figure.

Apparently, politicians who were trying to score political points with their corporate donors and wealthy constituents are partly to blame:

The root of this financial quagmire, it seems, lies in the mismanagement of funds by politicians who, instead of safeguarding the money poured into these programs, have effectively replaced it with IOUs… that are as substantial as the proverbial bag of sand in place of treasure.

This means that some of the hard-earned dollars that hard-working Americans are contributing might have been replaced by the equivalent of worthless slips of paper.

The solutions being proposed by lawmakers and think tanks to recover from this massive shortfall leave a lot to be desired.

The best “solutions” just delay the inevitable

One proposed solution was to roll back certain tax incentives to save Social Security, but that is just shorthand for raising taxes (or robbing Peter to pay Paul).

The Peterson Foundation listed a handful of other proposals that boil down to raising taxes, recalculating benefits, or delaying benefits:

• Eliminate taxable maximum (all income would be taxed)
• Increase payroll tax by 1% (from 12.4% to 13.4%)
• Subject cafeteria plans to payroll tax (which are intended to provide tax breaks)
• Cover newly-hired government employees (who can opt-out of the tax)
• Grow initial benefits with prices instead of wages (another way to increase taxes)
• Raise full retirement age to 69 (accounting for longer lifespans)
• Reduce initial benefits for high earners
• Calculate cost of living adjustment using chained CPI (accounts for all urban consumers, by accounting for substituted goods and services)
• Expand earning years included for benefits calculation from 35 to 40

None of these ideas appear to solve the underlying fiscal problems with the Trust, and look like they would only “kick the can down the road.”

It’s also quite odd that none of the proposed solutions address the problem of politicians “borrowing from” Social Security to fulfill political favors.

If that leaves you with the feeling that things aren’t “quite right,” you’re not alone.

Protect your financial future from the next economic crisis

In addition to the potential for an enormous retirement crisis at Social Security, this recent Brownstone article summarized another way your “nest egg” could be put in jeopardy:

It’s official: the Department of Treasury is now issuing debt at pandemic levels.

Or as Balaji Srinivasan puts it: “The economy isn’t real. It’s propped up by debt. They will fake it till they break it.”

Srinivasan has a point. If we take a look at this very disturbing page (14) on the Treasury Department’s report of the federal government’s financial position and condition. Pay attention to the lines I’ve indicated with red boxes:

Notice the following areas I indicated, from top to bottom:

• The Treasury borrowed $760 billion more than their own forecasts predicted
• We spent over $2 trillion in debt service payments in 2023
• Even though the federal government’s budget deficit was “only” $1.7 trillion, the national debt grew by twice as much, $3.4 trillion!

Peter St. Onge even thinks everything is heading in the wrong direction:

Every fiscal trend is in the wrong direction. We’re already at a $2 trillion deficit, it will soar by trillions when recession hits.

At this point there is nothing standing between us and fiscal collapse. The only question is when.

Thankfully, anyone who has some of their assets in gold could be enjoying the benefits of a more stable retirement portfolio right now, according to recent article:

Gold prices scaled to another record high Monday, propelled by U.S. interest rate cut expectations and the metal’s appeal as a safe haven asset.

“I think it’s a really exciting moment for gold,” said Joseph Cavatoni, market strategist at the World Gold Council, told CNBC on Monday.

In fact, the price of gold has soared more than 15% since October of last year. You can see the current interactive prices on most precious metals including gold, here.

That’s because physical precious metals like gold have historically provided a hedge against economic turmoil. That means having some of your assets in precious metals could stabilize your retirement savings, even if Social Security doesn’t recover fully.

You can get the rest of the story about the advantages of diversifying with precious metals like gold and silver in our free information kit (updated for 2024!).