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Could Social Security go broke? Today we’re going to talk about the question, could Social Security go broke? Now there’s some reasons that you’re seeing, if you get online to www.ssa.gov and you get your Social Security account set up, you can see your numbers, you can see what it’s projected that at 62, 63, 64, all the way up till 70, that you might start earning from Social Security. But you’ll also see on that little two page document that if you print it out, it says by 2034, it’s probable that we’ll only be able to receive 79% of our projected Social Security unless Congress acts. Now, I don’t know if that’s a subtle motivation for Congress to get their act in gear, but anyway, that’s on the Social Security reports that we’re getting right now.
There’s some reasons that Social Security, you say, “Wow, that’s been around forever.” Not forever. It’s been around 88 or 89 years, started about 89 years ago, and it actually went into force 88 years ago, and let me show you some things that have changed. In 1935, the life expectancy for an American male was 61 years and eight months, under 62. If you got to 62 where you could start drawing Social Security or it was called Old Age Pension is what it was called, if you got to the age of 62, you were living on borrowed time. But now the average age and life expectancy of Americans is 83 years old, so it was never really meant to last that long. People normally wouldn’t live to collect Social Security, but now many people can outlive their retirement savings because they have very little saved retirement and they are living off of Social Security, hence the real concern could Social Security go broke? It was designed to supplement.
Today across America, if you average the surveys, you’re going to find that it’s about 40% of the average American’s income in retirement. When I do the Social Security workshops that we do here in Southern California all over the place, every week we’re doing a one somewhere, I always tell people, “You can move to Mississippi and probably live off of your Social Security, but you’re going to have to learn a new language, okay? Because they just speak a different, I grew up in Georgia, so I can say that.” It’s about 40% of the average income.
Now, here’s the issue. When they started Social Security in 1935, there were 160 people paying in for every one person that was drawing out of Social Security. Now that number is down to 2.2 people paying in. It’s always been a gigantic Ponzi scheme. You had to have the workers from today paying into a little pot of money, but they were giving the bulk of the money into the program and that was going out to the people who were drawing and you always had to have continually people paying in and drawing out. That’s why we face about a 10 or 11 year period here where we’ve got to do something to keep it up because so many people are drawing. Used to, when it first started, 35 million was being paid out, now over a trillion for three years in a row has been paid out. The poverty rate during the Great Depression was 50% for seniors. It’s still not good. It’s still at 9.5%.
How do we fix it? If the question is will Social Security go broke or could it go broke, what are some of the I ideas that they have that could fix this and turn it around so it won’t go broke?
Well, let me give you the three major ones that are out there. Number one, they say, “Let’s take all of the people who are making more than $160,000 a year and let’s just charge them FICA,” which is, that’s what comes out for Social Security of your paycheck, “Let’s just charge them FICA on every penny that they make.” In 2023 when we’re making this show, anytime you reach around $160,000, you stop paying FICA and you don’t pay it from then on and so you’re free from doing it. Everybody says, “Well, let’s take those dirty, rotten, stinking high income earners who make over $160,000 a year and just make them pay FICA on everything.” You can do that, but the problem is, and the reason they all promote that is they’re far more voters who make less than $160,000. There are very, very few people as far as a large percentage, very few people make more than 160, and it wouldn’t come anywhere close to making the money that we need to make up the gap.
The second thing that we can do is we could take those same dirty, rotten, stinking, high income earners who make more than $160,000, and instead of making them pay up to 85% of their social, have it be taxed at their regular rate, let’s just make them pay that other 15% of tax and make them every dollar that they make on Social Security, let them be taxed on it. Well, that’d bring in a whopping 3% of what’s needed. I think this one, the numbers that I’ve seen, if we just continued to take out the FICA, that’d bring in 4%. If I had 4 and 3 and I’m trying to get a 100% of the gap filled, I’m short.
What can happen? Well, the last thing is delaying Social Security’s full retirement age for future generations. Now, I like to tell the story, Chris Christie, the little Pillsbury Doughboy from New Jersey, in 2016 was at a Republican debate in New Hampshire on a college campus, and there were 16 Republican candidates up there, and everybody that was a Republican in New Hampshire I think was on the stage that night. But they asked, they said, “How would you fix Social Security?”
Chris Christie said, “Well, let’s just raise the full retirement age for future generations to age 70.” That crowd booed him, and they asked the other 15 and they said, “No, no, we’ll never do that.” The problem is … Several problems. That’s the way Social Security was originally billed. Number two, they’ve already done that twice. Number three, that would solve the problem given the time for those people to get to Social Security age.
Now, let me tell you what I’m talking about. See, they would just have their cheese moved about three years. You said, “Well, why would they do that?” If you were born in 1945 or earlier, your Social Security full retirement age was 65. You’ve already hit it. If you were born from 1954 or earlier, down to ’46, your full retirement age was 66, they bumped it. Then if you were born from 1960, this side of 1960, your full retirement age is 67. You say, “Wait a minute, you left me out from 55 to 59.” Watch this. If you were born in 1955, your full retirement age is 66 years and two months. If you were born in ’56, your full retirement age is 66 years and four months. If you were born in ’57, your full retirement age is 66 years and six months. If you were born in ’58 at 66 years and eight months, and if you were born in 1959, it’s 66 years and 10 months. What they did was they gradually moved it up and so therefore now anybody born in 1960 or this side, your full retirement age is 67.
If they would continue to have the political backbone to do that and to tell people, “Look, we can keep Social Security fully solvent if we’ll just do this,” they would solve the problem. I think eventually they will do it. I think eventually that’s the only solution that’s on the table right now seriously being considered that will happen. I don’t think they will stand up on a television screen or in a debate or anywhere else and say, “You’re not going to get the Social Security that you paid in for all these years.” I just don’t think they have the political will to do that. I think they’re all in it to get reelected and nobody would get reelected if they would stand up and say that.
Could Social Security go broke? Yes. Can it be fixed? Yes. Is it an easy fix? Relatively speaking it is an easy fix because if you take a 20 year old or a 25 year old or a 30 year old and you say, “They’re going to raise Social Security,” they would go, “Oh, what do you mean?” Because all they’re thinking about is what’s coming out of their paycheck. That’s what they think of Social Security, FICA. But if you were to take somebody in the middle there and just say, “We’re going to move it just a little bit each year until we get to age 70,” it would make the whole system work. Could Social Security go broke? Yes, it could.
If you have any questions about Social Security, if you’re married, there are over 250 ways for you as a couple to take Social Security. If you’re single, there are over 170 different options you have with taking Social Security. Get some help. You go to the Social Security Office, they know how to turn your Social Security on. Every one of our six advisors here at Moseley Wealth Management is trained in Social Security, and we are trained by the National Social Security Advisors Administration, and they have a full course, 19 different segments of that course, we’ve all taken that, and we are here to help you make the best decision for you. Don’t listen to Bob at the water cooler. Don’t listen to Bubba the plumber. All of them have different Social Security options they need to take. But if you are Bob at the water cooler or Bubba the plumber, call, come let us know. You can let us know at email@example.com or you can call us at (714) 421-4288.