The other day, a piece of economic data came out that is good news for the longevity of the Social Security trust fund. It could mean that the fund DOES NOT RUN DRY in 2034 as was previously forecast. I’ll tell you what it is and why its so important to watch this moving forward.
Trump Administration Policies Are Fixing Social Security
Not long ago I saw a headline that said something like “Trump Administration policies are fixing Social Security.” I couldn’t find the exact one I was looking for but it’s no secret that President Trump has long advocated that the fix is neither benefit cuts nor tax increases, and instead it’s a simple matter of growing the economy and everything will fall into place. And there’s truth to that but we are getting so close to the point where even record setting economic numbers will be too little too late. But what we are seeing is promising!
The specific number I’m referencing is the unemployment rate. Economists believe this to be one of the most important economic indicators because of its far-reaching effect.
Unemployment Rate as a Factor
In the Social Security trustees’ report, they list the unemployment rate as one of the factors that will determine how long the funds last. In a very simplified explanation, this impacts the trust fund because with more people working, there are more taxes being paid into the social security trust fund. Thus, the retiree to worker ratio is improved.
Now, in this report they forecast an intermediate cost, high cost, and low cost scenario for all of the various factors.
The intermediate cost is where they get the assumption that the SS trust fund will be dry by 2034. If the cost goes down, the trust fund will last longer. If the costs go up, it won’t last as long.
The intermediate cost assumption they are using for the unemployment rate is 5.5%. The lowest cost scenario they show is 4.5%. But, for the first time in a very long time, the unemployment rate has dipped below 4%.
As of the last report it was at 3.8%. If it stays down here for long, the Social Security trustees will have to revise their estimates.
What Does This Have To Do With President Trump?
So what does this have to do with President Trump?
Well, he’s the president while unemployment rates have been pretty impressive.
Since 1969, unemployment rates for the year end have only gone under 4% twice. 2002 and 2018. The question is, is this a result of the policies of Donald Trump?
Yeah…I’m not about to answer that.
If you look at unemployment rates for the last decade, you can see that except for an increase at first, they’ve been coming down for the last nine years.
Is this because of the policies of president Obama? Could it be because of President Bush’s policies before President Obama was in office are finally being felt? We could take this back for decades.
The truth is, I think the President has less to do with the economy than we think. I mean, they don’t control monetary policy, so at best they have short term impacts on the stock market and an indirect effect on the economy.
The point is not to play politics or any of that nonsense. Its to remind you that these trustees’ reports are using assumptions THAT CAN and do CHANGE. And as things change, you can count on me to let you know.
It’s Your Retirement!
Before we go, I want to thank you for taking the time to get informed. So many people rely on hope that everything will work out. Sometimes it does, but sometimes a lack of planning can ruin what should be your best years. This is your retirement! Please continue to stay informed!
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