With our government staring down the barrel of nearly $62 trillion in unfunded liabilities, it’s easy to see why Social Security has become such a hot button issue today. That’s $62 trillion that the government has obligated itself to pay out in benefits, but it doesn’t have a dime of this money in its coffers at the moment.
That’s money that has been withheld from our paychecks in order to pay past users of the Social Security system. When the Social Security program was instituted in 1935, there were approximately 15 workers paying into the system for every person who was receiving benefits.
Those numbers have steadily shifted until today we only have 2-3 workers paying into the system for every person receiving benefits. Fewer and fewer workers are pulling the wagon, while more and more are riding in the wagon. Obviously this is unsustainable growth in the long run.
The question people have been asking for years is “At this rate, how long can we expect the program to remain solvent?” The answer from our government has always been some variation of “No worries, we’ve got it covered-for now.”
Students of the Missed Fortune strategies would be wise to pay very close attention to my next point.
Government leaders thought that Social Security wouldn’t be operating in the red until 2042. After closer examination of the numbers, that date was revised to 2017.
But even that estimate was overly optimistic!
The reality actually hit home in October of 2009 when the government paid out several billion dollars more in Social Security and Medicare benefits than they withheld from people’s paychecks. There is no denying that we’ve already crossed the threshold of operating in the red.
This means that the nation is facing a dire situation with Social Security. The trustees of Social Security have estimated a current unfunded liability, in tomorrow’s dollars, in excess of $100 trillion. In plain language, that means that the federal government has obligated itself to pay over $100 trillion in future benefits, above any taxes it expects to receive right now.
That’s how much would have to be spent right now, at U.S. Treasury rates, to pay the future liability owed to Social Security recipients who’ve faithfully paid into the system during their careers.
While there are any Americans that depend deeply on Social Security, there are others who are not so dependent upon the program. Regardless of which camp you find yourself in, you must understand that what happens with Social Security has the potential to affect all of us.
How the government chooses to address the projected shortfall of revenue to fund these promised benefits will affect our taxes as well as future legislation.
This reality will prove a major challenge for many Americans, but it will also provide a clear opportunity for those who wish to take charge of their financial future. Instead of relying on the government to take care of our retirement and our health, we can take ownership and be proactive about our retirement planning so we’re no longer dependent upon Social Security or our government having to provide for us.
But it is essential to act now, before future legislation and higher taxes have a chance to cut further into our personal finances and retirement planning. Knowing and implementing the Missed Fortune strategies is a great place to begin.