Posted by: coastcontact | April 6, 2013

Social Security is a Promise that will be Hard to Keep

Chained CPI is only the beginning of many other factors that will limit future payout.

Here is an unpleasant fact about Social Security.  The system was designed in the 1930s. Life expectancy at birth in 1930 was indeed only 58 for men and 62 for women, and the retirement age was 65.  Reported in USA Today, Social Security’s original retirement age of 65 was set in 1935 when life expectancy was 63. Today, life expectancy is 77 — and, for those who live to 65, life expectancy is 83. The system used to benefit financially from people who paid Social Security taxes but died before collecting any benefits.

When Social Security  was implemented almost 54% of men could expect to live to age 65 if they survived to age 21, and those who attained age 65 could expect to collect Social Security benefits for almost 13 years (and the numbers are even higher for women).  Men attaining 65 in 1990 can expect to live for 15.3 years compared to 12.7 years for men attaining 65 back in 1940.  This is data supplied by the Social Security Administration.

Some of the data is murky and can be interpreted to support your particular views.

I entered all of my Social Security contributions for my entire working years. I then calculated their future value in an Excel spreadsheet.   The calculation included the employer contributions.  I compounded the interest at 5% (Future Value Calculator for Single Payment-the annual contribution).  The results were enough money contributed to last 13 years.  But that calculation was made the year after I retired.  Since then my monthly SS income has increased.  As the increases continue my contributions may be consumed in ten years.

With growing numbers of people living into their 80s and 90s where will the money come from to pay their SS checks?  My guess is it will come from the general revenue of the United States.  That is the reason that chained CPI is inevitable as is a later retirement age.

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