ARFS - Introduction - Oh My Secured Social Security!


[This post is written and copyrighted by FIRE Finance (http://firefinance.blogspot.com).]


[Continued from ARFS - Introduction - Tension with Pension]

Our secured social security may not be a security anymore! On 14th August 2005, Social Security celebrated its 70th anniversary. For all these years it has kept the promise of providing security for its workers and families. But how long? Lets take a close look at Figure 3 which demonstrates the cash flow of social security.

Social Security Cash Flow

Figure 3: Social Security Cash Flow

Source : http://www.socialsecurity.gov/OACT/TR/TR05/VI_OASDHI_dollars.html#wp119091


Key points to be noted are:
  1. We are good till 2016: The entire cost of Social Security benefits can sustained by current tax income (alone) through 2016.
  2. From 2017 cash inflow will be less than outflow: In 2017 the cash flow will become negative. However, current tax income plus inflow from the trust funds that are less than annual interest income can still support all Social Security costs for years 2017 through 2026.
  3. From 2027 reserves start depleting: From 2027 through 2040 current tax income plus inflow from the trust funds that are greater than annual interest income could potentially pay for all Social Security expenses.
  4. Game is over: Year 2041 is the year of trust fund exhaustion.

Thus, if no measures are adopted now, the future of Social Security looks really bleak to us. Some proposed fixes might consist of drastic raises in taxes and / or significant reduction in social security benefits for Americans. Whatever the fixes are, it appears that they would be painful to most US citizens. Concerned readers may find answers to many of their questions in the following links :
[Continued to ARFS - Introduction - Did someone say Inflation?]

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