Is Social Security almost broke? Check out the video below and find out why everyone is so scared about the future of Social Security.
If you would like to read along, I’ve put the word-for-word transcript below. Enjoy.
So is social security about to be bankrupt? In today’s video I am going to tell you what everyone is so scared about and give you some of the facts, so you can decide for yourself.
Before we jump in to today’s video I am going to tell you that at the end of this video I am going to do something I have never done before in any of my videos. I am going to give something away. I don’t want to get in to it right now. I am going to get right in to the content about what’s going on with social security but stay tuned and I will give you all the details in just a few minutes.
You know, if you listen to the news it’s easy to get scared about the future of social security. You hear lots of things out there. In fact, here’s a few news clips, check these out.
Medicare and social security are going bankrupt. These are indisputable facts.
Aging population not supported by the number of workers out there. You have a bankrupt social security and medicare.
We got social security that’s going to be destroyed …
Well needless to say that doesn’t sound very positive. But this is where I want to hear from you. I’d love to know how my viewers feel about the future of social security. So there’s a question coming up on the screen now. You don’t have to go in to a lot of detail unless you want to. You can just give me a simple yes, or no in the comments below and I will know what you mean.
Before we get in to what lies ahead, it’s really important to understand what’s causing this problem. And to do that you need to have a good understanding of how the social security system works. Here’s a simplified view. So making the assumption that you are an employee, as opposed to being self employed, you receive a W2 like this one at the end of every year. So in box four, you’ll clearly see that there’s been social security taxes withheld. Now here’s what those social security taxes actually do.
So in the middle we have the social security trust fund. And one side we have today’s worker and on the other side we have today’s retiree. And today’s worker is paying in payroll taxes which are going in to the trust fund which are then being paid out to today’s retiree. So if more payments come in to the trust fund, than our paid out. They sit in the fund and collect interest. But the problem we are potentially facing, is one where all of the extra money that has piled up in the trust fund, starts to get spent and there’s not enough money coming in through tax revenue to pay retirees.
So here’s why we are facing this issue, in the 1950’s there was around a 16 to 1 ratio of workers to retirees. So we had a lot more people paying in to the trust fund, than were taking out of the trust fund. And then by 1960 it was a 5 to 1 ratio. 2015 that’s down to a 3 to 1 ratio. And the project is that by 2045 there will only be two workers for every retiree. So the problem is this ratio of workers to retirees just isn’t creating enough tax revenue to pay the current benefits that we have going out.
That hasn’t always been the case, for example let’s look at the last year, 2017. So according to the 2018 annual report of the board of trustees, there was 996 billion dollars in total income that came in to the social security trust fund. There were only 952 billion dollars in expenses. Now that really doesn’t agree with what we were hearing earlier from those politicians and pundits. This means that in 2017 there was a 44 billion dollar surplus. However starting in 2018 that is not going to be the case. There is going to be a 2 billion more in benefits that need to be paid than total income coming in to the trust fund. And that means they have to start to reach in to those asset reserves that have built up over all of these years.
So starting in 2018 the checks that retirees receive will be made partially out of payroll taxes and partially out of the asset reserves in the social security trust fund. And according to the current projections, by the year 2034, all of the asset reserves will be gone, which only leaves the payroll taxes to cover benefits. And those payroll taxes are only expected to cover about 76 percent of the amount needed to send to retirees.
Now there is no denying this is bad news and something needs to happen to fix this. But there’s a lot of hyper bally that’s going on out there, from again the politicians and pundits and those wanting to create headlines and sound bites when really it’s not quite as bad as it seems. For example if your bank account is getting low, do you run around talking about the fact that you’re bankrupt? Not hardly, as long as you have income coming in, there’s still something that you can do.
But despite that, we continue to see headlines come out on a daily basis that’s overwhelmingly negative. So we’re hearing a lot about these issues now. But this is not the first time we have faced this sort of trouble before. Back in the 70’s there were some economic and demographic trends that forced congress to take some action. And then in the 80’s it was the green spend commission that put forth several fixes that congress adopted and passed, that made several changes to keep social security solvent moving forward.
Ultimately, did it just kick the ball further down the road? It did, but I have no doubt that social security is going to come through and fix this again. So social security is not bankrupt. And while I didn’t want to get in to all the possibilities in this video, there is one thing I know. Any of these fixes will most likely come down to decrease benefits or increased taxes. And it most likely won’t be across the board. Not everyone will feel the decreased benefits. Not everyone will feel the increased taxes. But there will be one or both or a combination of those that will likely happen to shore up social security and make it viable for the long term.
So in the near future I am going to do some videos that discuss some of the proposals that have been suggested for fixing social security. So if you want to see those, be sure and subscribe if you haven’t already. And if you like this video, please give me a thumbs up.
Now I want to do something that I’ve never done before in a video and I told you about this at the beginning. So here it is, I want to give away the blueprint version of my book. And all of the videos I have been doing lately, you’ve seen the book that’s up on my shelf, social security basics. You can go out to Amazon and you can buy it. The paperback version is 12.99. But you can also get the blueprint version of that book. And this is exactly what it will look like. I went to the link and printed it off myself. So if you go to the link below, it’s going to be there. And it’s a fantastic book. It’s not the full version. It doesn’t go in to as much detail but it does help you to start to understand some of these basics and probably cut down on some of the questions that you may have about social security. An informed retiree is a happier retiree.
Well thank you so much for watching, have a great day.