Benson's Economic & Market Trends
8 May 2012
SOCIAL SECURITY BENEFITS COULD BE A THING OF THE PAST
Written and published by Richard Benson, www.sfgroup.org
In my youth, my father worked hard every day and looked forward to receiving his Social Security benefits when his time was due. When he finally began collecting, combined with a modest pension from General Motors where he worked for over 40 years, he was able to comfortably support himself and his family. By the time I reached mid-life crisis, my father passed on at the age of 80, just a few short years before GM went bust and his pension and additional health care would have gone up in smoke. Needless to say, my father was one of the lucky ones because both his social security and pension checks cleared up to the end.
Now that I'm old enough to apply for retirement benefits, my expectations of actually collecting until the end are fading fast. The bargain with the government of working hard and paying in so you will be paid in the future doesn't correlate with the current economic data I've seen. The chart below shows how much money is actually coming in versus how much money is going out, a wake-up call for anyone my age. It also shows that the needy and disabled along with those who have given up on work get paid first, so social security has effectively been gutted already.
The system is failing because Social Security Disability and the other programs for those young enough to work who have chosen not to, provides money to tens of millions of people looking for a government handout. Like all government programs for the needy, social security disability started out as a small government program originally designed to help workers who were seriously injured on the job or had some other legitimate reason to collect a government check and then a Medicare card two years later. Today the program has absolutely exploded and 10.6 million workers are hiding out on it. This means, approximately one out of five social security checks are going to a disabled worker. So, if you're expecting to collect social security anytime soon, you'll need to take a look at the numbers below prior to meeting with your estate planner:
Please notice that the hundreds of billions spent on government programs to house or educate the poor (because this article is not about being "poor") is not even added in. The focus of this article is on those who could be working, should be working, and the impact on the cost of paying them not to work. Whatever happened to earning a benefit? Today, all you need to do is be depressed and tired of looking for work to get full benefits.
Up until the turn of the century, social security took in far more each year in tax payments than it paid out. Indeed, so much more was taken in that Americans could actually afford big foreign wars! When you add the honestly-retired together with and the self-declared needy, the Federal Government is shelling out more than two dollars for every dollar collected (the other half has to be borrowed). There just isn't enough money to take care of both those who claim to be needy, and those who worked, paid tax, and stuck with the bargain.
The inevitable is about to happen. In a few short years, the rules for collecting Social Security will be changed from one of entitlement because you paid in and earned benefits, to one of pure need. If you have other resources available, you may have to exhaust them first and then prove poverty before collecting. Going forward, if you work, you are going to be required to pay Social Security tax knowing full well that if you save and invest for your retirement, your Social Security will be cut or eliminated.
The moral of the story is that America has lost its fiscal moral foundation. Today, it pays to be needy and it certainly doesn't pay to be hard working and thrifty! Knowing that those who are depressed and disabled get to receive Social Security before those who suck it up and go to work every day makes me more than a little depressed. Whoever said life was fair?
Specialty Finance Group LLC
Richard Benson, SFGroup, is a widely published author on securitization and specialty finance, and a sought after speaker at financing conferences on raising equity for mid-market companies.
Prior to founding the Specialty Finance Group in 1989, Mr. Benson acted as a trading desk economist for Chase Manhattan Bank in the early 1980's and started in the securitization business in 1983 at Bear Stearns, and helped build the early securitization businesses at Citibank and E.F. Hutton.
Mr. Benson graduated from the University of Wisconsin in 1970 in the Honors Program in Math, and did his doctoral work in Economics at Harvard University. Mr. Benson is a member of the Harvard Club of New York and Palm Beach.
The Specialty Finance Group, LLC is a Florida Limited Liability Company and is registered with the NASD/SIPC as a Broker/Dealer.