Jed Graham at Investors Business Daily has an interesting take on Social Security’s insolvency, which the CBO projects will take place in the early 2030s. When the trust fund runs dry, the plan won’t have sufficient funds to pay full benefits.
But Instead of thinking in terms of the percentage of annual benefits that would be paid – around 75% – Graham calculates the equivalent number of years of benefits a person would lose. A 62 year old today, for instance, will lose only around 1 year of total benefits. Again, it’s not that his benefits stop for a year, but the cumulative cuts he’ll receive add up to about 1 year’s worth of benefits. But the younger you are, the worse things get. Today’s 53 year olds will lose around 3.5 years of benefits.
Posts
1 comment:
I am not sure if you know it, but the SS-OASI trust fund cannot be exhausted to zero dollars. Legislation was enacted in 1984 that requires the trustees to submit to congress a report whenever the trust fund is projected to fall below 20% of projected expenses. It also requires that the trust fund ALWAYS be maintained at 20% of SS-OASi's projected expenses. Most likely to have cash available to pay benefits since OASI is not credited with payroll taxes but once a quarter.
In the simplest of terms, across the board cuts in SS-OASI benefits are required when the trust fund fall to 20% of projected expenses. This is a bit sooner than when the writer and others have calculate the exhaustion of the trust fund.
Another little known fact concerns COLA. COLA is zero when the cost of living index does not rise over its past highest value. This is why COLA was zero for two years. There is also a second part to determining COLA. When the trust fund reaches 30% of projected costs, COLA is reduced by 10% for each 1% reduction in the trust fund to expense ratio and is zero when the ratio reaches 20%.
As the number of people retire and the worker to beneficiary ratio falls, the ability to pay OASI benefits falls. It also means that about 4% of OASI revenues will be needed to be added to the OASI trust fund just to maintain the statutory 20% ratio of trust fund to expense ratio. This means that not only will SS-OASI be unable to pay full benefits, but with each passing year, the percent payable will decrease by about 0.5% a year for about 35 years until equilibrium in between the workers and beneficiaries is reached. Also during this period, COLA will be zero.
The writers projection is off by a lot. By year 2060 payable benefits will be about 60% of scheduled benefits and that will be without COLA.
www.justsayno.50megs.com/ss.html
Post a Comment