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I agree with that link as far as ongoing business. People buy annuities, they keep paying premiums to the insurance company, they collect payments when they reach the agreed-upon age. Some people die before that age and their premiums fund the payouts to people who live long enough to collect. (Ignoring Guaranteed Minimum Death Benefits, Survivor benefits, etc.)
BUT... if you sell deferred annuities starting at age 65 to a group of 25-year olds in 2019 do any of THEIR premiums go to pay the people who are now collecting? The cash from their premiums might go out the door to the older cohort but the company still needs to set up reserves (and have assets underlying those reserves) for the promises they've made to the 25-year olds. If SS were doing that correctly the trust fund wouldn't be on the road to being empty in 2034, or whatever the latest estimate is.
as they die the money goes to fund those who live ..that is what mortality credits are when you buy an annuity .
imagine 30 of us buying a 30 year bond ... all we each get as individuals is 3% ..but if our deal is that if one of us died each year , that money would go back in the pool for the others to share .. you can see each year those who live are getting a lot more than 3% ... in fact last man standing has a whopper of return . so life annuities don't pay out on the dead ... if you buy a joint annuity they adjust for 2 but when the 2nd dies all money stays in the annuity and funds those who live. at no time are these companies 100% funded .
insurers know exactly how many people will die each year and kick their money back in to fund the living ..to bad they can't tell us who , only how many
It was a Ponzi scheme from the start. The first beneficiary was Miss Ida Mae Fuller. She started collecting in 1940 at the age of 65, having worked for 3 years under the program. She lived to age 100 and collected $22,888.92 in benefits on contributions of $24.75. Her first monthly check was $22.54 so you can see that someone with a similar record could easily get WAY more out of the system than they paid in even if they lived only a few years after retirement.
(I see someone else mentioned her, too. That's what happens when you start dinner in the middle of composing a post.)
I agree with mathjak on SSDI, though. There are apparently small towns where a majority of the adult population is on disability. Much is legitimate, especially in factory towns where people just wore their bodies out early. Much could have been prevented through healthier lifestyles and better management of conditions such as diabetes and high BP. And then there are all the cases of opioid addiction, Big Pharma's gift to us.
Back when I was working on pricing black lung coverage, a colleague observed that coal miners would work even with symptoms- but when the mines closed there would be a rush of black lung claims. Same with disability, as mathjak noted- people may want to work but if there's no work they file for SSDI.
Thank lawyers and ADA act and unending expansion of mental “disorders”.
A 20 y. o. : “ I am uncomfortable around people and I am having panic attacks!Cant work!”
“There, there, my dear: here is your SSDI, go play some video games!”
Part of the money being paid in by younger workers is going into the pockets of current recipients.
Nope. All of the money being paid in by younger workers is going into the pockets of current recipients. The program is now cash flow negative.
I don't understand why people buy into the whole "trust fund" myth. That money was spent years ago. The Federal government can either borrow money to pay benefits that exceed this year's payroll tax receipts or they can raise payroll taxes in some way to make Social Security cash flow neutral. We all know which of those two options they'll pick. I suppose they could also cut benefits but every Congressman who voted for that would face a recall election and get booted out of their very cushy office. Nobody is ever going to slash benefits for anyone remotely close to collecting Social Security.
Thank lawyers and ADA act and unending expansion of mental “disorders”.
A 20 y. o. : “ I am uncomfortable around people and I am having panic attacks!Cant work!”
“There, there, my dear: here is your SSDI, go play some video games!”
Nice rhetoric but a 20 year old doesn't qualify for SSDI.
nonsense ... that is not how insurance works nor annuities ... annuities have those who die pay for those who live .i suggest you google these things to see how it works ..you can start by looking up mortality credits.
annuity's take the money from those who die daily and throw it back in to the pool where the mortality credits are added to the payout fund . the flow rate you get is based on current interest rates and mortality credits from the future dead .
I think you are arguing with an actuary, if I’m not mistaken, about how insurance works.
SSI which is for poor people that don’t qualify for SSDI and are disabled. The payment ranges from 300-700/month 7 years ago when I was working in the field. Both are extremely difficult to obtain. The only exception being if you are blind or terminal.
I think you are arguing with an actuary, if I’m not mistaken, about how insurance works.
Then that would be scary because they should know this stuff. All life annuities get mortality credits to fund them.. there is no 100% reserves requirement
Last edited by mathjak107; 06-11-2019 at 01:08 PM..
SSI which is for poor people that don’t qualify for SSDI and are disabled. The payment ranges from 300-700/month 7 years ago when I was working in the field. Both are extremely difficult to obtain. The only exception being if you are blind or terminal.
You can actually receive both. For example, if the SSDI benefit is below the SSI level, than an SSI benefit will supplement the SSDI award to bring the total benefit up to the SSI level. (Assuming the beneficiary meets the SSI asset test.) Also, SSDI benefits do not begin until five months after the onset of disability. Thus, someone who has little to no income could qualify for SSI benefits during the five months that SSDI is unavailable.
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