The incoherent political discussion on Social Security is baffling to me. It is mainly Republicans who keep threatening to disembowel it, yet a fairly high percentage of their voters are or will be largely reliant on it. Maybe those voters don't understand yet that they are not the ones reading the menu, but will be on the menu instead.
Social Security has been a very valuable social and economic tool that provides a major amount of financial security to a large percentage of the population. If it were to vanish quickly, I don't think people have even attempted to process the economic impacts of having workers dramatically increasing savings rate (reducing consumption) and retired people making major changes to their spending during recessions and market downturns if they are largely reliant on their own savings. Social Security is currently a significant economic flywheel where checks get sent out every month and spent within 30 days. This helps smooth out consumption during booms and recessions, so is anti-cyclical while eliminating it would be pro-cyclical and the amplitudes and frequency of economic booms and busts and market booms and busts would likely increase which is what we saw in the century before the New Deal. People living to 85 instead of 65 would amplify the economic impact beyond what we saw before the New Deal.
It will probably take a couple of more years to sort out the next 15 years of Social Security as mortality, especially among seniors, increased dramatically over the past two years while employment and inflation has been on a roller coaster. I have thought for a while that having a quarter to a third of the Trust fund in the stock market (using a simple total US stock market index approach) would make sense. The duration of the end of the Trust Fund is rapidly moving to a point where the risk would outweigh the benefits. The duration of stock investments is close to 20 years while the end of the Trust fund is only about 12 years out. 2023 would likely be a very good year to make a shift of some 2030s bonds into stocks but the incoherent political atmosphere makes that highly unlikely. It will probably happen when it would either be irrelevant or stupid.
The make-up of the Trust Fund is here: https://www.ssa.gov/cgi-bin/investheld.cgi Basically, it is bonds with maturities from now through mid-2030s with average interest rates of 2.3%. I think their maturity selection is based on actuarial analysis of need for the bonds maturing at specific times. Selling these bonds to invest in stocks in 2023-24 while the Fed is going through QT would probably be an additional stress on the 10-year T-bond market, so I doubt the Fed or Treasury are pushing for such a move.
Personally, I think Social Security will be around in something like its present form 20 years from now. But the inability of our society and politicians to address both Social Security and healthcare costs means that I am targeting saving an extra $500k in retirement accounts. This accounts for the potential for Social Security only paying out 75 cents on the dollar of promises and exorbitant US healthcare costs. That has been requiring significant savings rates and reduced consumption during our late career working years. If politicians truly threaten the existence of Social Security so it could to zero at some point, then we would significantly slash consumption during retirement. That loss of spending power would be unpleasant for us but catastrophic to many households. It would likely severely impact GDP, particularly during recessions. The small business owners complaining about paying FICA taxes would suddenly wonder why their customers went away.
The incoherent political discussion on Social Security is baffling to me. It is mainly Republicans who keep threatening to disembowel it, yet a fairly high percentage of their voters are or will be largely reliant on it. Maybe those voters don't understand yet that they are not the ones reading the menu, but will be on the menu instead.
Social Security has been a very valuable social and economic tool that provides a major amount of financial security to a large percentage of the population. If it were to vanish quickly, I don't think people have even attempted to process the economic impacts of having workers dramatically increasing savings rate (reducing consumption) and retired people making major changes to their spending during recessions and market downturns if they are largely reliant on their own savings. Social Security is currently a significant economic flywheel where checks get sent out every month and spent within 30 days. This helps smooth out consumption during booms and recessions, so is anti-cyclical while eliminating it would be pro-cyclical and the amplitudes and frequency of economic booms and busts and market booms and busts would likely increase which is what we saw in the century before the New Deal. People living to 85 instead of 65 would amplify the economic impact beyond what we saw before the New Deal.
It will probably take a couple of more years to sort out the next 15 years of Social Security as mortality, especially among seniors, increased dramatically over the past two years while employment and inflation has been on a roller coaster. I have thought for a while that having a quarter to a third of the Trust fund in the stock market (using a simple total US stock market index approach) would make sense. The duration of the end of the Trust Fund is rapidly moving to a point where the risk would outweigh the benefits. The duration of stock investments is close to 20 years while the end of the Trust fund is only about 12 years out. 2023 would likely be a very good year to make a shift of some 2030s bonds into stocks but the incoherent political atmosphere makes that highly unlikely. It will probably happen when it would either be irrelevant or stupid.
The make-up of the Trust Fund is here: https://www.ssa.gov/cgi-bin/investheld.cgi Basically, it is bonds with maturities from now through mid-2030s with average interest rates of 2.3%. I think their maturity selection is based on actuarial analysis of need for the bonds maturing at specific times. Selling these bonds to invest in stocks in 2023-24 while the Fed is going through QT would probably be an additional stress on the 10-year T-bond market, so I doubt the Fed or Treasury are pushing for such a move.
Personally, I think Social Security will be around in something like its present form 20 years from now. But the inability of our society and politicians to address both Social Security and healthcare costs means that I am targeting saving an extra $500k in retirement accounts. This accounts for the potential for Social Security only paying out 75 cents on the dollar of promises and exorbitant US healthcare costs. That has been requiring significant savings rates and reduced consumption during our late career working years. If politicians truly threaten the existence of Social Security so it could go to zero at some point, then we would significantly slash consumption during retirement. That loss of spending power would be unpleasant for us but catastrophic to many households. It would likely severely impact GDP, particularly during recessions. The small business owners complaining about paying FICA taxes would suddenly wonder why their customers went away.
I'm sure the (at least conservative) politicians will say we can't fix social security because it will increase the debt, while they spend away on nonsense stimulus, tax cuts, Mideast Wars, etc.
My own thought with SS is to have some of it invested in the stock market, closer to the investment pyramid scheme, than just relying on t-bills. Medicare could use some help too--in that regard I'm fully leaning democratic socialist and wanting Medicare for all. It would be more efficient than the multitude of insurers and gobs of different government programs (and maybe even Workman's Comp medical portion) currently in place. It should be lower cost across the board. The only problem as I see it would be all the unemployed paper pushers and HR dept. workers, lol.
The incoherent political discussion on Social Security is baffling to me. It is mainly Republicans who keep threatening to disembowel it, yet a fairly high percentage of their voters are or will be largely reliant on it. Maybe those voters don't understand yet that they are not the ones reading the menu, but will be on the menu instead.
Social Security has been a very valuable social and economic tool that provides a major amount of financial security to a large percentage of the population. If it were to vanish quickly, I don't think people have even attempted to process the economic impacts of having workers dramatically increasing savings rate (reducing consumption) and retired people making major changes to their spending during recessions and market downturns if they are largely reliant on their own savings. Social Security is currently a significant economic flywheel where checks get sent out every month and spent within 30 days. This helps smooth out consumption during booms and recessions, so is anti-cyclical while eliminating it would be pro-cyclical and the amplitudes and frequency of economic booms and busts and market booms and busts would likely increase which is what we saw in the century before the New Deal. People living to 85 instead of 65 would amplify the economic impact beyond what we saw before the New Deal.
It will probably take a couple of more years to sort out the next 15 years of Social Security as mortality, especially among seniors, increased dramatically over the past two years while employment and inflation has been on a roller coaster. I have thought for a while that having a quarter to a third of the Trust fund in the stock market (using a simple total US stock market index approach) would make sense. The duration of the end of the Trust Fund is rapidly moving to a point where the risk would outweigh the benefits. The duration of stock investments is close to 20 years while the end of the Trust fund is only about 12 years out. 2023 would likely be a very good year to make a shift of some 2030s bonds into stocks but the incoherent political atmosphere makes that highly unlikely. It will probably happen when it would either be irrelevant or stupid.
The make-up of the Trust Fund is here: https://www.ssa.gov/cgi-bin/investheld.cgi Basically, it is bonds with maturities from now through mid-2030s with average interest rates of 2.3%. I think their maturity selection is based on actuarial analysis of need for the bonds maturing at specific times. Selling these bonds to invest in stocks in 2023-24 while the Fed is going through QT would probably be an additional stress on the 10-year T-bond market, so I doubt the Fed or Treasury are pushing for such a move.
Personally, I think Social Security will be around in something like its present form 20 years from now. But the inability of our society and politicians to address both Social Security and healthcare costs means that I am targeting saving an extra $500k in retirement accounts. This accounts for the potential for Social Security only paying out 75 cents on the dollar of promises and exorbitant US healthcare costs. That has been requiring significant savings rates and reduced consumption during our late career working years. If politicians truly threaten the existence of Social Security so it could to zero at some point, then we would significantly slash consumption during retirement. That loss of spending power would be unpleasant for us but catastrophic to many households. It would likely severely impact GDP, particularly during recessions. The small business owners complaining about paying FICA taxes would suddenly wonder why their customers went away.
The incoherent political discussion on Social Security is baffling to me. It is mainly Republicans who keep threatening to disembowel it, yet a fairly high percentage of their voters are or will be largely reliant on it. Maybe those voters don't understand yet that they are not the ones reading the menu, but will be on the menu instead.
Social Security has been a very valuable social and economic tool that provides a major amount of financial security to a large percentage of the population. If it were to vanish quickly, I don't think people have even attempted to process the economic impacts of having workers dramatically increasing savings rate (reducing consumption) and retired people making major changes to their spending during recessions and market downturns if they are largely reliant on their own savings. Social Security is currently a significant economic flywheel where checks get sent out every month and spent within 30 days. This helps smooth out consumption during booms and recessions, so is anti-cyclical while eliminating it would be pro-cyclical and the amplitudes and frequency of economic booms and busts and market booms and busts would likely increase which is what we saw in the century before the New Deal. People living to 85 instead of 65 would amplify the economic impact beyond what we saw before the New Deal.
It will probably take a couple of more years to sort out the next 15 years of Social Security as mortality, especially among seniors, increased dramatically over the past two years while employment and inflation has been on a roller coaster. I have thought for a while that having a quarter to a third of the Trust fund in the stock market (using a simple total US stock market index approach) would make sense. The duration of the end of the Trust Fund is rapidly moving to a point where the risk would outweigh the benefits. The duration of stock investments is close to 20 years while the end of the Trust fund is only about 12 years out. 2023 would likely be a very good year to make a shift of some 2030s bonds into stocks but the incoherent political atmosphere makes that highly unlikely. It will probably happen when it would either be irrelevant or stupid.
The make-up of the Trust Fund is here: https://www.ssa.gov/cgi-bin/investheld.cgi Basically, it is bonds with maturities from now through mid-2030s with average interest rates of 2.3%. I think their maturity selection is based on actuarial analysis of need for the bonds maturing at specific times. Selling these bonds to invest in stocks in 2023-24 while the Fed is going through QT would probably be an additional stress on the 10-year T-bond market, so I doubt the Fed or Treasury are pushing for such a move.
Personally, I think Social Security will be around in something like its present form 20 years from now. But the inability of our society and politicians to address both Social Security and healthcare costs means that I am targeting saving an extra $500k in retirement accounts. This accounts for the potential for Social Security only paying out 75 cents on the dollar of promises and exorbitant US healthcare costs. That has been requiring significant savings rates and reduced consumption during our late career working years. If politicians truly threaten the existence of Social Security so it could go to zero at some point, then we would significantly slash consumption during retirement. That loss of spending power would be unpleasant for us but catastrophic to many households. It would likely severely impact GDP, particularly during recessions. The small business owners complaining about paying FICA taxes would suddenly wonder why their customers went away.
I fully expect Social Security to still exist in the future.
However, I expect it will be like all pensions post hyperinflation, the month's check will buy something on the order of a loaf of bread.
Things that can't go on, don't.
I'm sure the (at least conservative) politicians will say we can't fix social security because it will increase the debt, while they spend away on nonsense stimulus, tax cuts, Mideast Wars, etc.
My own thought with SS is to have some of it invested in the stock market, closer to the investment pyramid scheme, than just relying on t-bills. Medicare could use some help too--in that regard I'm fully leaning democratic socialist and wanting Medicare for all. It would be more efficient than the multitude of insurers and gobs of different government programs (and maybe even Workman's Comp medical portion) currently in place. It should be lower cost across the board. The only problem as I see it would be all the unemployed paper pushers and HR dept. workers, lol.
Can we even have a serious financial debate in this political climate