Payment of Social Security will insure future inflation (loan, calculate, buying)
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People worry that the government will not be able to pay future Social Security benefits due to the fact that the money paid in to Social Security was loaned to the Federal Government and exchanged for Notes or IOU's.
This fear is baseless. The government will pay Social Security obligations due to the fact that there is no restraint, (except for what it places on itself) on its capability to print money.
The problem with this however is that money printed without a corresponding increase in GDP is inflationary.
The government will make good on its obligation to cut you a retirement check, but what the value of that check will be in actual buying power is what you should be worried about.
The government even now is using every trick in its bag of tricks to deny inflation despite what we all experience and know to be true.
With 78 million baby boomers entering retirement age, the amount of money that will need to be printed will be astronomical.
Of course this will preclude most boomers from really being able to retire despite receiving their Social Security and will exasperate their financial shortcomings due to the fact that the resulting inflation will also cut into the buying power of whatever they can earn in the menial jobs they will be able to find.
Of course this will preclude most boomers from really being able to retire despite receiving their Social Security and will exasperate their financial shortcomings due to the fact that the resulting inflation will also cut into the buying power of whatever they can earn in the menial jobs they will be able to find.
Gee, I didn't know people's financial shortcomings had emotions. (Try "exacerbate").
On a more serious note, my take on the subject of your post is that you are taking a real phenomenon (printing money leading to inflation) and exaggerating its effect. The reason Social Security benefits have COLA's is to keep people from falling behind. I understand your point that the COLA's understate the real amount of inflation and I think to some extent that's true. However, to say that people will no longer be willing to retire is overkill. It would be more accurate to say that some people will have to tighten their belts somewhat.
Social Security estimates it will be able to pay out until 2038, after which many of us will be dead. Has anyone calculated how much money will need to be printed? And dividing by GDP, how much inflation will result? I heard the cumulative deficit is $59 T, compared to annual GDP of $134T. Average that over 20 years, that is about 2 percent, assuming no GDP growth. Your figures?
Last edited by pvande55; 06-24-2012 at 05:00 PM..
Reason: Add numbers
Social Security estimates it will be able to pay out until 2038, after which many of us will be dead. Has anyone calculated how much money will need to be printed? And dividing by GDP, how much inflation will result? I heard the cumulative deficit is $59 T, compared to annual GDP of $134T. Average that over 20 years, that is about 2 percent, assuming no GDP growth. Your figures?
It is 2033, not 2038. It has kept decreasing since 2009 or so, so it really could be broke by the end of the decade.
Social Security estimates it will be able to pay out until 2038, after which many of us will be dead. Has anyone calculated how much money will need to be printed? And dividing by GDP, how much inflation will result? I heard the cumulative deficit is $59 T, compared to annual GDP of $134T. Average that over 20 years, that is about 2 percent, assuming no GDP growth. Your figures?
Social Security began paying out more than it took in this year. Since there is no real assets behind the notes Social Security holds, the government has no choice but to print the difference. This printing will increase every year from now on. Of course this is on top of what the government is printing to make up the shortfall between tax revenues and what it actually spends. The estimate for Social Security and Medicare shortfall is about 45 trillion dollars.
It is 2033, not 2038. It has kept decreasing since 2009 or so, so it really could be broke by the end of the decade.
My Statement of Earnings from SS has had a notice for the last two years saying something to the effect. . . this is the estimated amount you can draw from SS. However, there is no guarantee you will receive 100% of this sum. I believe it says starting in 2038, to expect 75% of the amount I'm entitled to draw.
My Statement of Earnings from SS has had a notice for the last two years saying something to the effect. . . this is the estimated amount you can draw from SS. However, there is no guarantee you will receive 100% of this sum. I believe it says starting in 2038, to expect 75% of the amount I'm entitled to draw.
I'm betting on more like 0%.
Based on what reasoning are you "betting on more like 0%"? And what facts support that reasoning?
If I were a betting man, I would bet on 100% because there will be enormous pressure on Congress to make some changes in Social Security to avoid getting into that 75% payout territory. SS is being honest and conservative in warning people about the possibility of that rather dramatic cut, as they cannot be sure what action Congress will take, if any.
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