How to Understand the Real Cost of Your Social Security Payments and How the Government Can Afford to Pay Those Benefits

How to Understand the Real Cost of Your Social Security Payments and How the Government Can Afford to Pay Those Benefits Lex Loeb Contributor Network . Arbitrarily assuming that about 80 million Americans are working and now paying social security taxes to eventually be able to collect future benefits, how is it possible for the US Government to do so? This is a simplified means of exploring the calculations required. One of the best things going in favor of the government being able to meet its obligations is all 80 million participants will not be retiring or becoming sick and unable to work at the same time. Staggering the number of retirees receiving benefits allows others to stay working to pay the taxes required to keep the system running with timely benefit paid. Social security benefits are indexed to inflation so that should be considered a wash in calculations as taxes paid will be higher just as benefits will be higher. Assuming, in a worst case scenario that 80,000,000 people will seek benefits all at once, There still should be some new workers on the scene still paying taxes to fund those benefits. Assuming the average benefit per month is $1750 for a total of $21,000 a year per beneficiary (excluding Medicare taxes) then the government will have the obligation of paying out 1,680 trillion (1680 billion dollars) per year to run the program. The remaining workers paying into the system will have to be paying as much in social security taxes to pay for this government expenditure. If there are 80,000,000 workers still working and paying into the system each will owe $21,000 a year essentially in social security taxes. That is a lot more money than you may presently be paying in social security taxes now? It is the same thing as $1750 in taxes per month for the remaining workers. Those remaining workers will have to hope that there are yet another 80 million new workers in the more distant future to pay the same amount of money to pay for the next generation of social security payments. It is possible but at the moment does not seem likely because the baby boom generation has not replaced itself with a new baby boom as large as their own. That requires foreign nationals and maybe even Mexican guest workers to help make up the difference? Or it requires a general growth in the wealth of the country not just the levels of income but the buying power of income. If the population of workers with good high paying jobs was increasing substantially there would be no trouble for the US government to make payments that may not be a viable theory according to the population trends at the moment. 1.6 trillion dollars is about half of the federal budget before the recent financial bail out expenditures. It actually seems to be within the realm of possibility that the government should be able to keep up those payments with a lot of assumptions being met. If however the economic recession trends toward a catastrophic economic depression, social security Will more quickly become an issue of how government will make the payments because their tax flow revenues will necessarily decline in a big way. Government can borrow money to tide over some excesses in spending at least for a while but then risks going bankrupt later. When professional politicians start telling you every thing is going to be OK , that may be the best time to start worrying about the future. Your social security benefits ultimately depend on the government's ability to raise taxes as a retiree in the future you will discover what a lot of social security recipients already have discovered that your social security benefits are fully taxable as income! So your taxes will likely be going up on the money the government is now promising to pay you and since corporate taxes are also likely to go up the cost of the things you buy with your retirement income will also be going up to cover the corporate taxes! If you have an income of $21,000 a year and you find you get taxed on that either way it is not worth very much. $1750 a month is a whole $58 a day to live on. You probably still have your basic bills to pay to live in your home even if you own it free and clear plus you go to a grocery store and $58 might pay for just 4 days of food. If you need transportation too you can quickly get strapped for cash with your big $1750 payment per month. If you can, the best way to live on a social security payment like that is to relocate to a foreign country where costs are lower but then you are paying taxes elsewhere on the products and services you but plus income taxes in the US and not necessarily helping out the economy that needs to pay you your benefits. Actually that is inaccurate because spending funds overseas ultimately can only be spent back in the USA and just takes longer to become taxable income here and eventually does. Government has many more things to spend money on than your social security payments beware. The reason they have not funded your future payments yet is because the politicians have an infinite number of pet projects and wars to pay for. The way the system works is that you probably will just loose purchasing power or have to pay higher taxes on higher benefits as it is unlikely that the government will default on its obligations to pay. Social security is actually a government program that pays for itself in theory , even though the government is not funding your accounts with the money you are now paying into the system. It is not a give away benefit and it is not a free lunch. It should be a solid entitlement and the main entitlement that Americans should require government to fund first paying out benefits to those who have made no contribution to the system like welfare beneficiaries. Social security beneficiaries will eventually be pitted against welfare beneficiaries once the public understands there is a scarcity of funding for everything the government wants to spend money on. The economic contraction now going on and worse promised by the Obama's stupid insistence on going green with unnecessary carbon taxation that will shut down most US industry or send it overseas will create tension between the various recipients of federal aid and those who long believed their social security taxes were going to their respective accounts as required by the original law. Deficit spending can only go on so far until it has unhappy consequences. Right now , already it requires deficit spending by uncle SAM to pay a lot of existing social security benefits as promised. Indexed to inflation, it has to be real money while it lasts. In economics theory there is the guns verses butter expenditure matrix to consider. If the US wants to wage war in Afghanistan still and maintain a foreign military presence around the world that funding can be in competition with social security benefit obligations too. Nationalized health care, beyond Medicare, really threatens competition for your existing social security benefit even if the government raises taxes and this is because the providers of medical supplies and services beyond the basic doctors you see as a patient will be getting those "single payer payments" people like Hillary and Obama are talking about. That is like giving a drug company a social security payment per patient . It cannot stop the costs from spiraling higher but will result in medical rationing and will cause you to give up some butter so the government will be able to buy medical guns to fight medical cost containment problems. It means higher social security taxes and new medical security taxes added in and there is no reason to believe that this will cut into government pork barrel expenditure deficit spending. Assuming the average payment is $21000 a year from social security per retiree after a certain age then it requires the government to have saved about $420,000 per retiree over their working life paying into the system at 5% a year representing the payment. If there are 80 million workers we are talking about the government actually needing to save 33.6 trillion dollars and having it invested at more than 5% per year equivalent to pay out the promised benefits ($1750 per month) When those payments are fully taxable than government gets a big part back. It could all work out fine in the end but beware. Adding another entitlement program like free health care for all ages would add another 60 trillion dollars requirements or more for the government to insure over 400 million people against all health care issues. World War III comes along and it will run up 200 trillion dollars over 10 years and the country is beyond broke. Already Social Security maybe the biggest government run ponzi scheme in world history? Time will tell. Forces in the government are suggesting you should give up your 401k program and your IRAs because you may have lost some money in the market. Think about it before nodding your head in agreement. The government is just interested in stealing that 401k and IRA money to pay for other failed social security programs. Don't let them get away with it. Your private pension plans are insurance against social security going bad and should not stolen to pay for a program that seems ever more likely to fail as government fails to fund its obligations. Even if you loose 70 percent of your 401k plan because the market falls temporarily or permanently it might be better to have that much money as insurance when otherwise all you get is what the government plans to give you and then tax you on as social security. If you feel like government is there to take care of you think again. Government takes care of itself first and you last guaranteed. it does not mater what they promise you or how slick the rhetoric of politicians is they know who comes first. Once you become totally reliant on government you begin to realize that you are more like your pet dog or cat. They show you the treat when they want you to beg for it and not the other way around. Private pensions are much more the solution than bigger government all encompassing programs. If you actually think just because you voted for your politicians that they will beg once they are in power to do tricks for your treats you had better be a billionaire and not just a millionaire. Try this sometime to prove it to your self: call your local senators office and tell them that you want to speak to the senator tell them your real name. Your telephone call will be forwarded to an "information specialist" than hang up and call back and tell them that you are Rupert Murdock's secretary and you want to make an appointment to speak to the senator, Your call could go right thought to the senator himself. Then you say hi, Mr Senator, I am Rupert Murdock's secretary I want to make an appointment when my boss is in Washington on such and such a day. You might even get the appointment even if the senator has to fly in from Nebraska to be there. Some people are much more equal than others once you vote in a government that puts political capital ahead of financial capital. If you think that financial capital is bad enough political influence as the alternative is a horror that mixes both the need to entice with money as threats or favors. Someone with a social security entitlement benefit has not political capital and has no financial capital until the government pays that is why you never want to give up the alternative of a private pensions, never, ever. You are even less equal than you are if you don't have to beg. .