Thursday, April 25, 2013

Social Security drop dead date accelerates toward us; maybe by 2023?


In differential calculus, you learn about the “rate of change” to predict what is going to happen. That certainly applies these days to analysis of when the Social Security Trust Fund will run dry, even assuming no defaults or debt ceiling fiascos. 

In 2008, the dry date was 2041. If that is the slope in which it changes, then in 2018 the year would be 2025.  So, following eighth grade Algebra I, we really could run dry by about 2023, when I would be 80. 
   
According to current law, when the fund is running dry, it can only pay proportionately based on what it takes in.  Benefits, even for existing retirees, would be cut at least 25%.
  
The link from Daily Finance is here.
  
Several factors accelerate the drop-dead date:  low interest rates, and high unemployment.  President Obama’s “Chained CPI” proposal would only make up about 25% of the shortfall.
   
One issue is the payout for Social Security disability claims, which is separate from SSI (explanation here at SSA, link.
   
Of course, one of the biggest drivers of the problem is rapidly increasing longevity.
   
Is it thinkable for many people to go back to work at age 80?  I’ve assumed I will never have to stoop to hucksterism.  

Picture: From my Master's Thesis at the University of Kansas (1968);  there are more nodes on this curve than necessary to analyze Social Security!

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