Status of the Social Security Trust Fund, Fiscal 2020: Beware of Vicious Dog

 Will Social Security Be There for You? Yes, but…

By Wolf Richter for WOLF STREET.

The Social Security Trust Fund – officially the Old-Age and Survivors Insurance (OASI) Trust Fund – closed the fiscal year 2020 at the end of September with a balance of $2.81 trillion, the second highest fiscal-year close, behind 2017, up by $6.8 billion from a year ago, and up by $10 billion from two years ago, according to figures released by the Social Security Administration. The Trust Fund has vacillated in the same range since 2016, after growing substantially over the past decade.

The balance is seasonal and peaks in June. The all-time peak was in June 2017, at $2.85 trillion. In June this year, the balance was $2.84 trillion. So far so good:

The Trust Fund invests exclusively in special issue Treasury securities, of two types: $2.797 trillion in interest-bearing long-term special issue Treasury securities and $14 billion in a short-term cash management security, called “certificates of indebtedness.” These securities are not publicly traded, and so their value doesn’t change from day to day with the whims of the market. The Trust Fund purchases them at face value, and the US Treasury redeems them at face value.

By contrast, a bond mutual fund that holds marketable Treasury securities must “mark to market” its Treasuries on a daily basis (producing a gain or loss).

By investing exclusively in Treasury securities that are not exposed to market whims, the Trust Fund follows the most conservative – meaning, low-risk – strategy possible.

This setup is an efficient, low-cost way of administering the Trust Fund and doesn’t allow Wall Street to extract fees and load the fund up with risks. That’s why Wall Street hates the Trust Fund and wants to “privatize” it in order to get its hands on the $2.8 trillion, extract fees out of it, and use it as dumping ground for its risks.

According to the 2020 Trustee Report, 54 million people drew Social Security retirement benefits at the end of 2019:

  • 48 million retired workers and dependents of retired workers
  • 6 million survivors of deceased workers.

The Disability Insurance (DI) Trust Fund is separate from the OASI Trust Fund, and is not part of this discussion here. But just to note: In 2019, it paid benefits to 10 million disabled workers and dependents of disabled workers.

During 2019, 178 million people paid into Social Security via payroll taxes. These contributions, together with interest income from the securities, generated income of $1,062 billion. Total costs of the program were $1,059 billion. A $3 billion surplus. That was for fiscal 2019.

The Trustee Report for fiscal 2020 – the 2021 Trustee Report – is not yet available, but we know already that the Trust Fund grew by $6.8 billion this year. So far so good.

Three issues: Demographics, the Fed’s interest-rate repression, and inflation.


For now, the Trust Fund is benefiting from millennials having entered the workforce and gaining earnings power as they move up in their jobs. But there is also the drag on the Fund of the boomers who’re now between 55 and 75 and are transitioning into retirement in ever larger numbers. For the past few years, the equation has been in balance – with millennials and boomers being both huge generations. But it will gradually change, and when it does, it will show up as a downward slope to the line in the chart above.

The Fed’s interest rate repression.

The effective interest rate earned by the securities in the Trust Fund has been declining for years, particularly after the Financial Crisis, when the Fed used QE to force down long-term interest rates. And the Fed’s current interest rate repression will show up as lower interest income in future years.

In September, the weighted average interest rate earned on the securities was 2.53%, still higher than current Treasury yields, thanks to long-term securities that carry the higher interest rates of yore. But since 2009, it has fallen by about half. And at current interest rate policies, the declines will continue.

Despite the 27% growth of the Trust Fund from $2.22 trillion in 2009 to $2.81 trillion in September 2020, interest income has dropped by 30% over the same period:

Beware of Vicious Dog: Inflation exceeding COLAs.

The monthly Social Security payments are adjusted for inflation via annual “Cost of Living Adjustments.” These annual adjustments are based on a formula that uses the “Consumer Price Index for All Urban Wage Earners and Clerical Workers” (CPI-W) in July, August, and September. The Bureau of Labor Statistics will release the CPI for September on October 13. The COLA for 2021 will be set after that. So, just guessing here, based on CPI-W in July (0.96%) and August (1.40%), and the upward trajectory it has been on in recent months, this COLA adjustment for 2021 may be in the 1.3% range.

Actual costs of living for retirees – or really for anyone – are going to increase far faster, depending on where they live, how they live, and where they spend much of their money. Even if the actual cost of living increases by only 1 percentage point faster than the annual COLA every year, after 10 years, 20 years, or 30 years, you’re talking about a serious deterioration in purchasing power of the Social Security payments. Inflation will eat more than retirees’ lunch.

Efforts to make inflation even more pernicious.

There have been discussions underway for shifting the COLAs from CPI-W to a chain-type price index because they run lower than CPI-W, and therefore in small increments every year, inflation would eat even more into the purchasing power of the Social Security payments.

Someone might be barely able to squeak by on Social Security, and use their savings – if they even have any – to supplement their budget. But each year, this gets harder, and this retiree is going to have to cut back, and cut back, and cut back year after year…. Every time this shift to a chain-type index for COLAs comes up in Congress, there should be a deafening hue and cry from everybody, young and old, because it would weaken Social Security as a safety net.

So, Social Security will be there for you, but…

You can rely on the Social Security payments. But they will lose purchasing power. The purchasing power of the payments will diminish every year, year after year, because the COLAs are not enough to cover the actual increases in the cost of living.

This is just a simple fact, and it’s not an accident, it’s purposefully built into the system. And this decline in purchasing power might shave 20% or 30% off your standard of living over the first 20 years of retirement. If it was tough to live on Social Security early on, it will be brutal after 20 years. And people need to add this into their calculations.

Hypothetical depletion of the Trust Fund.

If demographics shift in the wrong direction, and if interest rate repression continues, the Trust Fund will eventually pay out more every year than it receives from contributions and interest income, and the balance will begin to decline. And if no adjustments to contributions or payouts are made, and if demographic shifts continue, at some point, the Trust Fund will be depleted. The Trustees estimate that the Trust Fund will be depleted in 2034 unless some changes are made.

Depletion of the Trust Fund doesn’t mean that Social Security will collapse or will be “broke” or whatever. It simply means either that workers will have to pay in a little more, or benefits will get cut, or both. Social Security has been fixed before. Raising the maximum amount of earnings subject to Social Security tax would be one way of doing it, and has been done before. And there are other ways. These adjustments will be made – as they have been in the past – well before the depletion date.

The story of the man who told me that Social Security would collapse before he could ever draw on it.

Over the decades, I have heard many predictions about the implosion of Social Security. But here is the one I never forgot because I was at an impressionable age. When I was a senior in high school, the dad of my sweetheart told me that Social Security was a “scam” and that it would blow up before he could ever use it. He was a CPA and had an accounting and tax firm. He passed away a few years ago, after having collected Social Security every month during his retirement. And now his wife is collecting his Social Security survivor benefits. Social security outlived him, and it’s going to outlive me too.

But Social Security was never intended to provide adequate retirement on its own. My solution is to put money aside while working, and work as long as possible – way past retirement age, especially if you have something interesting to do. Look at all these old politicians: They’re all fired up, they’re having a blast, and they’re not about to let go of that much fun, nor of the income from it, unless someone kicks them out. And I too intend to do that – keep working being fired up and having a blast at my evil WOLF STREET media mogul empire until my brain freezes over.

As after the last crisis, fueled by ultra-cheap money, they’re taking financialization of the housing market to the next level. Read… The Big Boys Are Back: Financializing Single-Family Houses

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  248 comments for “Status of the Social Security Trust Fund, Fiscal 2020: Beware of Vicious Dog

  1. IdahoPotato says:

    Politicans have few term limits, great healthcare benefits paid for by the tax payers and a system where it is very hard to overthrow incumbents. They feel no obligation to ensure citizens can depend on income deducted from their earnings for their entire working lives.

    They call your own deferred income through Social Security “entitlements”.
    The sheeple parrot it like the gospel.

    • Rasheedah Muhammad says:

      Entitlement…..absolutely…..I’m ENTITLED to what my employer and I gave the US Federal Government to hold and invest IN GOOD FAITH of our deductions. That’s a plain, simple, rational and logical statement

      • MarMar says:

        The idea is not that your money (or that of your generation) is saved and then paid back out to you. The idea is more that current workers support retirees, and when they retire, they are supported in turn by the workers who will come after them.

        • Wolf Richter says:

          Yes. Except there is this $2.81 trillion trust fund, where workers in past years paid more than retirees in those years drew, and the accumulated surplus became the trust fund, and now those workers that are retiring, or are approaching retirement over the next few years, are the ones whose contributions fed the trust fund.

        • TheRealMRDyno says:

          Someone needs to explain to me how it is not a retirement plan, when police, teachers, etc are allowed to skip paying for it and instead contribute to their own retirement plan.

        • MCH says:

          Not to worry, Wolf, We the people, know how to deal with surpluses.

          We’ve put those things down before, and by God, if we have to, we will do it again. Read my lips, No more surpluses.

        • Ralph Hiesey says:

          MarMar is EXACTLY right. But that needs further explanation!

          There is this extremely widespread illusion that the trust fund is paying out old money collected years ago, to support SS of present recipients.

          Well, yes, that’s the illusion. But when that money comes out of that “trust fund,” which is money supposedly collected years ago–what actually happens is that the money deducted from the trust fund — comes from everyone’s CURRENT taxes. That is from where money from the trust fund magically appears in the present. It’s the only place it could possibly come from.

          So current SS benefits are paid for by a combination of recently collected 14% payroll tax, then any difference is made up in effect by the trust fund money taken out of CURRENT income taxes, not past money. That’s the way it always has been and always will be.

          Fortunately, in the past, trust money wasn’t stashed under a mattress, or in a golden “lockbox” with a key.

        • Wolf Richter says:

          Ralph Hiesey,

          Seems like you got yourself tangled up a little. In nearly every year going back to 2009, more money was collected via payroll deductions and earned from interest income than was paid out. Hence, there was a surplus (more taken in than paid out) in just about every year since 2009. This surplus was added to the Trust Fund. That’s why the Trust Fund grew. But money is fungible — meaning that once money is in a particular bucket it’s indistinguishable from other money in that bucket, and it’s irrelevant – and impossible to tell – if the money that was paid out was freshly added to the bucket or was old money that has been in the bucket for years. Look at your checking account. Works the same way.

        • Ralph Hiesey says:

          I’ll try again with a different approach- I hope not too long..

          This is an issue into which which it is extraordinarily easy to become entangled. This came from my Stanford college economics course in 1962. Hopefully I remembered it right.

          The main point is that during each separate month the gov’t must divert a portion the economy’s goods/services output from present workers to SS recipients in that SAME month. They cannot say we diverted that amount ten years ago, so now we can send it to you. Goods/services are perishable, so to balance the economy the value that is diverted and distributed must be done at the same time from present workers to present recipients.

          The way goods are diverted is by collecting a tax in that same month in some form in combination of payroll tax and income tax. That amount is distributed by writing SS recipients checks for the that same amount each month. If the tax numbers do not match the SS distribution that month there would be either a shortage of goods, or an unsold surplus left in the economy.

          Bottom line is that taxes and disbursements must balance each month. The Trust Fund just keeps track of the surplus or deficit that month–but doesn’t have any other effect except it directs a trickle of interest each month to go from general tax fund to the Trust fund.

          So money collected way ahead of time can’t help. It will make the fund go up, but no matter how it’s done, tax from somewhere (payroll +/- income tax) must equal SS disbursements in each month — or the economy will get badly messed up.

          The day the trust fund goes to zero, it could even go negative except for a minor point that this would be illegal. No one but the accountants would know. No taxes would change .

          I much prefer the solution of raising the income level upon which payroll tax is collected above $133K. It’s a super regressive tax that income above $133K does not now touch.

        • Wolf Richter says:

          It seems you’re describing my checking account. That’s how money works. Everything is just a debt or credit. We’ve gotten comfortable with that long ago, except when it relates to Social Security? Somehow when it comes to Social Security, we want to see boxes full of $100 bills with names on the boxes?

        • Thomas Roberts says:


          It’s not considered a retirement plan, because, originally it was designed to prevent people who did successfully live a long time and could no longer work from being destitute. It wasn’t expected to make up a significant part of a person’s life.

          As for the local city and sometimes state pensions, I’ll pass. Calipers (the California plan) is going to be devastated just like Detroit’s was. Those local pensions are much more risky, although, realistically the Fed might have to cover those who had failed local pensions. If that happens though, the number of failed local pension systems will skyrocket, although work from home, could cause enough people to move to destroy many as well.

        • Thomas Roberts says:

          As for protecting social security, they need to remove the cap from max income for social security altogether. Treat all income the same (I.e. Capital gains would just be income). Get rid of local and state systems like calipers and switch to paying retirees an amount relative to where their income used to be. So if income level wise you used to be in the 55% percentile, you would make maybe 50% of that (in then present dollars, once you’ve elderly you should have less expenses) from social security (there would be additional considerations as well). You would also automatically get food stamps and certain other benefits.

          The entire healthcare system is a disaster and needs to be fixed. Food stamps rather than being a check for groceries, could be a agency that buys up for directly from farmers, pays to have it processed and delivered (possibly to your house in certain situations, otherwise you would have to pick it up at places that are managed by the city). As for the food provided it would a system that gives rations of essentials and then let’s you get choose with a point system and other mechanisms what you get. You would end up with assortment of staples like rice, bread, wheat, eggs, ready to cook mixes, and whatever fruits and vegetables the agency gets a good price on. As well as some bakery and premade items.

          Most students back at my high school (late 2000’s including before 2008 recession) thought social security and other pensions won’t be there for them. Beyond how social security itself works, they thought America would be too poor in the future, because, the older generations would looot everything. And that there simply wouldn’t be any money left (both many democrats and most Republicans thought this).

      • Joe Saba says:

        enough said – but you’re not close
        IT’S SUPPOSED TO BE BASED ON INCOME for lifetime + COI(which govt is screwwing us on)

        Actual costs of living for retirees – or really for anyone – are going to increase far faster
        ie DEVALUATION(ie buying power of almighty $dollar) are going to price out most retirees soon enough
        I’ve told my wife that soon we’re gonna price out most of our retirees currently renting our units – ie thru RENT INCREASES
        so sorry – but I didn’t create system – just living by it

      • Alku says:

        you only have to pay for 10 years – but given you live long enough – you can collect more than you’ve paid :)

        • Dave says:

          @alku you are thinking of Medicare where you can get a full benefit for 10 Years of work.

          With social security unless you become disabled your benefit would be prorated down based on 10 years of work instead of 35 years which is needed for a full benefit.

        • roddy6667 says:

          Your monthly SS check would be mighty small if you only paid in for ten years.

        • Frederick says:

          I paid into the system from 68 till 2008 so 40 years
          I hope to live awhile longer to get at least some of it back

        • Alku says:


          I was referring to 40 credits you need to become eligible: max 4 credits a year / ~ 6K yearly income.

    • historicus says:

      How many government employees get automatic and elevated bumps every year?
      In IL, 3% every year for pensioners. That doubles their pension in just over twenty years. Retiring at 55, and bringing in during retirement much more than you ever made working.

      • Severn says:

        That’s because they have unions. Something more workers might want to consider.

        • There is no free lunch, someone, someday will have to pay for this.

        • David G LA says:

          They have unions, they vote, and their employer (the government) doesn’t have to make a profit or even balance the budget.

        • roddy6667 says:

          The unions entered into retirement agreements knowing full well that the money is not there. The government officials on the other side of the table figured they will be dead when it all collapses. Both sides are criminals. So we need more criminals fleecing the taxpayers (unions)???

      • Mario says:

        The problems facing SS were known long ago but the worthless politicians have chosen over and over again not to address them. America has a history of elect ing losers to manage the country. I’m speaking specifically about Congress.

        • sunny129 says:

          ‘America has a history of elect ing losers to manage the country’

          Wonder Why?

          If every voter, discerns clearly between the those lawmakers who vote more for PRIVATE interest over the interest of the PUBLIC and vote accordingly, we will have more sensible lawmakers in favor of what’s good for the general interest, NOT the private interest like – Military industrial complex, Medical industrial complex including Big Pharma, etc. It is all there, a public record of their voting hx, online!

          Some how, most voters are easily ‘brainwashed’ by both WARFARE and WELFARE parties and distracted by political ideology ( Lib/Cons, Capitalism vs Socialism)

          Below the Belt issues like abortion, birth control. This happens prior to EVERY election.The latter have NOTHING to do with solutions needed for our (& furure generations) problems like ‘meaningful’ education or jobs for now and for the future. Packing SCOTUS with judges favoring their ideology, right or wrong is now more important than the needed 2nd stimulus for the bottom 90%!

          Blind ideological slavery (polarization) has triumphed over critical thinking, which is hard to graduate in, for many!

          WE have found the enemy. Look in the mirror!

        • George says:

          In 1981 then president Regan assembled a Blue Ribbon commission headed by none other than Alan Greenspan to address Social Security shortfalls. Their report and conclusions out in 1983 amounted to an entire (baby boom) generation over – paying in advance their payroll withholding taxes along with increases to age eligibility requirements. It was sold to us as a fix desperately needed because so many of us were fixing to retire all at once.

          Also Regan for the first time ever, started taxing Social Security benefits which continues until today. Do you remember Al Gore’s Social Security lockbox? It was full of non marketable securities (I.O.U.’s). These were quickly used in just about every Administrations general fund as illegal as it still remains today.

          And these are just a couple of the shenanigans our elected and non – elected representative’s have played regarding Social Security. So as you can see, they have tinkered with Social Security much. It original intent was far from the all inclusive club it is today. The historic origins of Social Security is a very informative read.

      • Lisa_Hooker says:

        As with any Ponzi scheme, those taking cash out earlier will fare better than those requesting cash when contributions fall below disbursements.

    • VintageVNvet says:

      This ”sheeple” doesn’t parrot that line IP,
      I been saying for many years that the best way to ensure the SS and Medicare program is to make them the ONLY tax payer supported retirement and medical services delivery programs.
      When every elected politician, every single one of them, PLUS every appointed or hired guv mint employee at every level of guv mint has to rely on SS and Medicare, you can bet your bottom dollar those programs will be healthy for eva…
      Anything else will eventually cause the entire global wealth now delineated in digital dollars, to CONTINUE to be sucked into the criminal and corrupt crony capitalism that we now see growing all around us.
      SO: 1st, Term Limits on all guv mint employees, elected and appointed; 2nd, SS and Medicare ONLY for all.
      There, fixed it!

    • kk says:

      The US is a democracy, if the demos ie ‘we the people’ vote to share out the wealth of the country fairly, then it must be shared out fairly.

      • Stuart says:

        Indeed. The Congress can allocate funds over and above those collected through payroll taxes, at any time and in any amount. The idea that SS will go broke is just another right wing lie. Let’s start with transferring some of that corporate welfare masquerading as “ Defense “ expenditures into SS and give everyone receiving retirement and disability benefits a substantial raise.

      • sunny129 says:

        @ KK
        ‘we the people’ vote to share out the wealth of the country fairly’

        Yeh. Wonderful concept!

        See my comments/reply to Mario above. Thank you

      • Briny says:

        No, the US is a Republic. We elect representatives that supposedly have our interests at heart. Sadly, that stopped being true rather a long time ago.

    • Tony22 says:

      Income taxes are also “entitlements” to politicians from taxpayers, working within a VOLUNTARY income tax filing system.

      “The U.S. tax code operates on a system of voluntary compliance. Some taxpayers have used the voluntary nature of the tax system to support their claims that they don’t have to pay tax at all. However, it isn’t the payment of the tax itself that is voluntary. Rather, it’s the manner in which people submit their own taxes.”

      Copied from Turbotax’s website.
      No endorsement of them.

    • Ed says:

      Wolf describes a disgusting and pathetic system. When will pathetic, sick Americans ever outgrow their ignorant right wing ways?

    • Brant Lee says:

      The politicians make SS look like “Entitlements” because they spent the actual fund and the payments are coming directly from each current year’s tax revenue. Their promises to spend sound great at election time, especially if no one bothers to ask where the money is coming from.

      I would think the nation would be in depression this year if not for Social Security payments. There would be a heck of a lot of older forgotten starving people like in the 30s.

      Most people can’t manage their money through life or can get wiped out. That’s just the way it is. A monthly check for most is essential.

    • PhilM says:

      Given we are about to enter a Supreme Court Nominee battle it’s worthwhile to review Fleming v Nestor. We might like to think it’s
      “our money” but that has not been upheld by the SC
      ” In this 1960 Supreme Court decision Nestor’s denial of benefits was upheld even though he had contributed to the program for 19 years and was already receiving benefits. Under a 1954 law, Social Security benefits were denied to persons deported for, among other things, having been a member of the Communist party. Accordingly, Mr. Nestor’s benefits were terminated. He appealed the termination arguing, among other claims, that promised Social Security benefits were a contract and that Congress could not renege on that contract. In its ruling, the Court rejected this argument and established the principle that entitlement to Social Security benefits is not contractual right.”

      • Harrold says:

        That’s one of the reasons H1-B visa holders are so popular with corporations. The corporations do not need to pay the matching Social Security tax, making them 6.2% cheaper.

    • Mickey says:

      Do not forget someone coming here say at age 40 gets the same medicre as some starting work at age 20,

      Spouses who never work get medicare and soc sec when the spouse dies

      And the real inflation rate the past 30 years has been 5% points higher than the govt uses.

  2. nodecentrepublicansleft says:

    They are ENTITLED to it because they paid into it! :) IT. IS. OUR. OWN. $!

    If it weren’t for SS, I would have ended up in a state run orphanage after my father’s death when I was 7 years old. I hold SS near and dear to my heart.

    Why let the GOP rip Grandma’s $600 check from her hands? Why?

    We COULD make SS even better but that would require compassionate human beings in places of power within our government.

    It’s the most successful program in US history. Embrace it and make it even better. We are all brainwashed to think the USA can’t do things other western industrialized nations do, like provide free health care and college to the citizens.

    It’s time for Americans to wake up and demand the society we deserve. Keep up the good work, Wolf!

    • OutsideTheBox says:

      You live in a van down by the river.

      Why should we listen to your arguments that are used to demean ?

      By the way, the argument that SS = welfare is confused
      and incoherent .

      • Frederick says:

        Lots of Van people nowadays Look on youtube you will see that their numbers are exploding Coming to a Kroger’s parking lot near you Thanks FED

    • Lou Mannheim says:

      Well written, and I completely agree. We’ve mastered much of the physical world, enough to provide that and more. It’s the Capital folks that need to accept lower IRRs though. I don’t see that happening without a fight.

    • happy_man says:

      if social security is so good, why am I forced to participate?

      Taking my income by force and putting it into a program I want no part of is Un-American.

      nodecentrepublicansleft, it’s not true that the only options were Social security or state run orphanage. That’s like saying, if not for the government lording over us, we’d all be hunter/gatherers

  3. Pacifica says:

    Oh that’s why we are 27 trillion in debt, not including unfunded liabilities..

    • Wolf Richter says:


      No. You got this mixed up. Social Security is a LENDER to the US government. That Trust Fund is the amount of money Social Security has LENT to the US government, just like me or anyone else: when we buy Treasury securities, we lend to the US government, we don’t contribute to the US debt.

      • NG says:

        The money LENT that will be never paid back

        • Wolf Richter says:

          BS. It’s paid back every single time a Treasury security matures, which is the pre-set date when the US Treasury Department redeems it by paying the holder face value. I hold some Treasury securities and that’s how it has been working from day one, every single time. Never once failed.

        • Wolf is correct, it will be paid back but the value of what you get back will be greatly diminished, even Wolf would have to concede that fact.

        • Wolf Richter says:


          In terms of semantics: I wouldn’t call it “value” because that’s expressed as “face value.” Your $1,000 bond will be paid back with $1,000. But you’re talking about “purchasing power.” And purchasing power of anything gets crushed by inflation. A big theme here.

          And that’s OK-ish if the yield more than compensates you for the loss of purchasing power. But that’s NOT happening. We are in a period of “financial repression,” as it’s called.

        • Yes and I certainly don’t trust the government, or at least the one we have

      • CRV says:

        By buying Treasuries you make it possible for the government to go into debt. If you make something possible, you contribute to it.
        Just my logic.

      • Crush the Peasants! says:

        Precisely, Wolf. But this argument, that the Trust Fund money is not there, is made by supposedly reputable blogs. The counter argument would be – well, that must come as a shock to all the US Treasury holders, then.

      • Sunny129 says:

        Thanks, Wolf for clearing this misperception, repeated again & again!

        Part of that ‘why we are 27 trillion in debt’ is due to USA trying to global policeman and maintaining hegemony over the rest of the world lime maintaining over 600 bases, world wide.
        Spending 2-3 Trillions in meaningless wars in ME since 2003, creating millions refugees and over 6000 US soldiers dead! For what? Where is the public outrage? THINK!

        • MarkinSF says:

          Except that the number wasted (i.e. transferred from the Treasury to war profiteers) is currently estimated at $5.2T. I wonder how many posters raging at government waste, spending & deficits actually supported these invasions?

  4. timbers says:

    You forgot to mention a big contributor to potential Social Security insolvency.

    The upper income thresh hold subject to tax has not been raised for a long time by deliberate policy choice by or governing elites, so as to accomplish their objective to undermine and eventually destroy Social Security.

    This – never raising the upper income thresh hold – was never intended by the founders of Social Security. The founders of Social Security intended the upper income subject to tax be raised at least at the same rate as inflation. And by inflation, not the fake inflation the Fed and government uses. But instead, the real inflation rate as shown by stocks, investments, housing, assets, etc.

    Real, actual, inflation that affects the cost of living.

    If the upper income was raised based as always intended, by the rate real actual inflation, you might be able to find a Social Security funding short fall maybe in the next 200 or 300 or 400 years. Good luck with that.

    Remember…the ratio of Social Security beneficiaries to payees is and always has been about 1-1. Contrary to anything else anyone claims.

    • Joe Saba says:

      pay 100% ssi taxes on 100% income
      then MEANS TEST(based on today) SSI benefits
      if you make over $150,000 in retirement do you REALLY NEED SSI-NOOOOO

      • Frederick says:

        You definitely do NOT need it

      • Then SS becomes a welfare program, don’t we have enough forced wealth transfer?

        • IdahoPotato says:

          Most of the “forced wealth transfer” is upwards. Interesting how the huge suite of tax cuts targeted at the wealthy and owners of assets (the corporate tax structure, capital gains, real estate, etc) are not called “welfare programs”. A bailout of the airline industry or the banks is called a “bailout”.

          When there is an attempt to restructure healthcare costs through Medicare for all or make Social Security contributions more equitable, suddently it is “welfare program” and a “forced wealth transfer”.

        • Apple says:

          Social Security taxes have been eliminated this year by fiat. If this continues next year, it will become a welfare program.

        • Wolf Richter says:


          Not eliminated. DEFERRED. Another deferral program, like forbearance and all the others. They’ll have to be paid back next year. That’s why most companies said forget it, we’re not following this crap policy.

        • Ed says:

          Deferring the payroll taxes helps how?

          The people that need the help are unemployed! Those are the people who can’t pay their rent or utilities.

          I think that deferral is two things: first, a symbolic bit of “help” that has little effect but can be touted and, second, another attack on social security and medicare.

        • Nacho Libre says:

          SS sooner or later will become one of the these unsavory things:

          1. Turn into a welfare program.

          2. Number of people who contribute keeps magically increasing to keep up with number of retirees who draw from the program.

          Base of the pyramid needs to keep ever expanding to keep the scheme going. There is a famous term for such a setup.

          3. Real value of benefits keeps shrinking. BLS is on it with its bogus inflation numbers and Fed is on it with its active devaluation of currency.

          4. One or more of the above.

      • Beardawg says:

        Joe Saba

        I agree with your premise, but when my Dad was forced to take SSDI (Parkinsons Disease) from age 58 until 65, he protested, said he didn’t need the $$$ (he was a doctor and had decent savings). We kids told him to take it because his private disability insurance required it AND we joked we (kids) would not get our SS except through his inheritance.

        Well after reading Wolf’s excellent article, we kids WILL get SS, but looks like it will be beaten up by inflation, so I am glad my Pa took his benefit.

        My Pa ended up needing most of his savings for a hospice-like private living facility toward the end of his life. What he collected in SSDI was a drop in the bucket of those expenses….BUT… others have stated – you paid it in, so you should get it out, regardless of your income level. It is not meant to be wealth re-distribution, it is meant to be a forced savings account of sorts.

      • Petunia says:

        Since people are forced to contribute, they are entitled to a benefit. It’s not about need, it’s about a level playing field, fairness counts. People who don’t need it can donate it to their favorite causes.

        I do agree the SS tax should be on every dollar earned. That way they can lower the tax rate for everybody.

        • Anthony A. says:

          I’ve contributed into SS rom 1959 (yes, since then) to 2019 (last year I had wages from consulting. That’s a long time…..and I have now been collecting from my DEPOSITS since 2012.

          It is not an entitlement for us guys, it’s getting back what we put into the system. If we collect more than what we put in, good for us.

    • Nacho Libre says:

      > “real inflation rate as shown by stocks, investments, housing, assets, etc.”

      Is there an indicator for that? Would love to know.

      All we have is skewed numbers from BLS and Fed.

      • Frederick says:

        You left out the number one indicator Precious Metals Funny how that happens Do you work for the FED?

        • sunny129 says:

          One must specify the ‘TIME FRAME’ ( 10yr-20yr-30yr++) re REAL ‘Inflation rate’ for each asset class including CASH, Bonds, Stocks and PMetals in the past. Otherwise it is meaningless!

          Remember No one lives for ever!

    • Dave says:

      The upper income limit does go up by the same amount average wages go up.

      • p coyle says:

        that sounds fair. who do i vote for to ensure this policy remains in place?

    • Max Power says:

      Ummm… no. The wage threshold does get adjusted annually for inflation.

      Perhaps you are confusing the Social Security income threshold with the threshold of when social security disbursements start being subject to income tax. That threshold has indeed not been raised in decades, thus causing more and more people’s Social Security payments to to subject to IRS income tax as time goes by. But this has nothing to do with undermining the viability of Social Security. It’s just a way to shaft more and more Social Secure recipients every year.

  5. Brady Boyd says:

    Just refill the HP cartridges and print some more money. Am I missing something here?!?!

    • Joe Saba says:

      they don’t use outdated HP Printers
      just computers and iPhones

      • MCH says:

        Yes. It is another industry that we are destroying here with the Internet. Think of all those poor money printers, in the printing presses, and the people who work at them.

        Not to mention the entire supply chain supporting them. Those are people too, you know. what’s next? Going after the insurance industry. Is an AI going to replace the telephone workers that tells you your insurance is denying benefits, and that’s putting that cooperator out of a job. How cruel.

        Have you no compassion.

    • Nacho Libre says:

      Why print when you can just type it in? Less dead trees.

    • Max Power says:

      Not a good idea. Have you seen how much those cartridges cost? ;-) The govt would go even more bankruptier than it already is.

      I think they should switch to Epson ecoTank :-)

  6. Joe in LA says:

    The incoherent rage in America is money in the bank for plutocrats. Say what you will about America, you can absolutely count on the fact that 95% of Americans will never catch on to the class war that they have so decisively lost.

    • Joe Saba says:

      soon to be 99.9%

    • Escierto says:

      Got that right. Living in trailer parks in Mississippi complaining about socialism. Never underestimate the stupidity of the American people. Dumber than dirt.

      • dan worley says:

        Yes, and privatizing education will keep it that way.

        • Lisa_Hooker says:

          Dan, you forgot the sarcasm tag.

        • nick kelly says:

          Actually the cost to educate a kid in public school here in BC Canada, has hit about 12K a year for about 160 days a year teaching or attendance anyway.

          My brother was in the returns line at Costco
          with a teenager in front. The clerk said, “OK sign here for refund”

          No could do. The teachers have opted out of ‘cursive’, aka ‘writing’ and after spending at least a hundred grand on educating this kid he can’t sign his name. So I guess it’s back to ‘his mark’ (here gov docs for pensions still have that option) like the days before public ed.

          Don’t even ask about history or geography.
          Here in this city of over 100K a kid has to be bussed to take physics. It’s like he wanted to take Mandarin or something.

          One high school here where a friend is a TA told me the staff has quietly, verbally. been told to stop recording ‘lates’

          So the teens aren’t learning about punctuality either.

          There are lot of dedicated teachers in the system but the system works against them.
          There is no accountability for results because the deadwood is protected by the union.

          I say give industry a chance to see what it can do for that amount. I don’t see how they do worse.

          BTW: ‘the dumber than dirt’ are products of public education, unless they weren’t educated at all.

  7. KGC says:

    When I read “I intend to do that too” I was hoping it meant you were going to “kick them out”.

    I sincerely believe every gov’t employee (from the President on down, to include judges, Senators, etc.) should have a mandatory retirement date, and it should not exceed 70 years of age. I cannot believe the best and brightest, most capable people to lead this nation are 20+ years older than me when I’m planning on retiring in the near future.

    In the 1970’s it was all about not trusting anyone over 30. Funny how that changed when they got into office.

    • Petunia says:

      The most disgusting thing I ever saw in congress was wheeling in almost dead senators to vote. It reminded me of the old Soviet Politburo, but worse.

  8. Reyn Blight says:

    Great analysis of a problem many people only have a vague understanding of. Its obvious the Fed has repressed interest rates for some time and plans to continue to do so into the future. This has fueled a huge inflation in stock and bond prices but not helped the Social Security recipients. I think it would only be fair if the Fed transferred at least one of the trillions of dollars of treasury bonds backed up on their balance sheet to the Social Security Administration to offset the damage they’ve done.

  9. A says:

    Your brain freezes over, wolf? Are you planning to go into cryo sleep so you have a chance to be reanimated as the ultimate debt slave in our cyberpunk future?

  10. lenert says:

    From Propublica in 2018:
    If You’re Over 50, Chances Are the Decision to Leave a Job Won’t be Yours

    “ProPublica and the Urban Institute, a Washington think tank, analyzed data from the Health and Retirement Study, or HRS, the premier source of quantitative information about aging in America. Since 1992, the study has followed a nationally representative sample of about 20,000 people from the time they turn 50 through the rest of their lives.

    Through 2016, our analysis found that between the time older workers enter the study and when they leave paid employment, 56 percent are laid off at least once or leave jobs under such financially damaging circumstances that it’s likely they were pushed out rather than choosing to go voluntarily.

    Only one in 10 of these workers ever again earns as much as they did before their employment setbacks, our analysis showed. Even years afterward, the household incomes of over half of those who experience such work disruptions remain substantially below those of workers who don’t.”

    • Wolf Richter says:

      Yes, ageism is a huge problem, especially in tech, and elsewhere too.

      But people can start their own thing and stay active and make some money — even if it’s less money than they made at their peak earnings period. This could be consulting, or starting their own business, or learning a trade and using it, or turning a hobby into a business or whatever…. Even a part-time job somewhere is helpful in keeping retirees active and supplementing income. not everyone can pull it off, but it’s worth a try, and it’s very rewarding if it works out.

      • Beardawg says:


        Great article pulling back some of the myths of Social Security and also great comments RE reinventing yourself after 50. I retired (pushed out) from the desk job at 50 and became a FT musician. Not so much a hobbybtgat pays well, but sooo much better for the mind and soul. ;-)

      • lenert says:

        With respect, these are all great personal virtues but when only 1 in 10 is regaining their previous earning power it’s a serious policy failure.

      • No1 says:

        Advice about this would make a great article too!

  11. One of the following must occur:

    1. Social Security benefits rise with
    the pace of actual, true inflation.

    2. Urban rents drop dramatically.

    3. More tents get pitched on the sidewalk,
    so grandma has a place to stay.

    Society has chosen #3, apparently.

  12. YuShan says:

    Instead of working forever, you can also choose to quit and do the things you want to do while you are still relatively young and healthy. Enjoy life while you still can. What is the point of throwing your life away just to be financially secure at age 95? (which you will probably never reach anyway).

    Your healthy years are worth much more than your old age years in a carehome (if you are lucky – many will have to live on the streets the way things are heading now).

    There is a point to be made to just set your life end-date at (say) 75 and make sure you enjoy the present to the full. If there is still money left after that, great, that gives you a few bonus years. After that, just exit happy on your own terms after a life lived in full.

    However, if you cut all unnecessary crap (the stuff that doesn’t really make you happy) out of your life, you will save tons of money and feel more freedom. Reject consumerism, live minimalist. In that case you may even sit it out till your natural expiry date.

    • QQQBall says:


      Yes, most people live there lives backwards

    • California Bob says:

      re: “However, if you cut all unnecessary crap (the stuff that doesn’t really make you happy) out of your life, you will save tons of money and feel more freedom.”

      Yep, was thinking similarly just this morning: life is (at least) as much about shedding the unimportant as acquiring more stuff. Or, as a famous philosopher once said “Life is what happens when you are busy making other plans.”

      • Lisa_Hooker says:

        That was John Lennon, a musician. Unfortunately he never got close to his use-by date. A lesson for us all.

        From my collection:
        “Sometimes life hits you in the head with a brick. Don’t lose faith.” – Steve Jobs
        “Open your eyes, look within. Are you satisfied with the life you’re living?” – Bob Marley
        “Life is a lively process of becoming.” – Douglas MacArthur
        “We are here to add what we can to life, not to get what we can from life.” – William Osler

        • Anthony A. says:

          Let me add one:

          “Everyone has a plan, until they get punched in the mouth.” -Philosopher Mike Tyson

    • Dave Kunkel says:


      I agree completely and have lived that way. I retired several times when I was in my 20’s. I lived in Omaha and used to quit whatever job I had and cruise around the country on my Triumph. I would head back to Omaha when I started to run low on money or the weather got crappy – which ever came first.

      People forget that when you get old, there are many things that are much more difficult to do. Just getting from gate to gate in an airport is not much fun in your 70’s.

  13. Harvey Cotton says:

    Social Security IS a pyramid scheme, BUT if we ever run out of working contributors at the base of that pyramid we will have much bigger problems than how to fund retirement. Like the extinction of humanity or the end of American sovereignty.

    No, the problem is that Congress plundered money from the trust fund long ago to fund war and general purpose outlays – and I fear that if this half-assed M.M.T. experiment we are currently conducting goes sideways, the United States government will selectively default on its obligation to make it whole again.

    • Wolf Richter says:

      Harvey Cotton,

      “…the problem is that Congress plundered money from the trust fund long ago..”

      You need to quit mindlessly regurgitating this ignorant BS. The Trust Fund invested in Treasury securities just like bond mutual funds invest in Treasury securities or as I invest in Treasury securities. It’s the most conservative investment there is. No one plundered anything. But if the fund is privatized, Wall Street will certainly plunder it with fees and as dumping ground for its toxic crap.

  14. MiTurn says:

    “My solution is to put money aside while working, and work as long as possible – way past retirement age, especially if you have something interesting to do.”

    Great advice and which I echo. Retirement is a great time to try out interesting things, many of which provide a financial return. And it can be fun! My wife and I opened a jam business (which failed) and now are in a book business (which does okay). But we’re doing it together, which is best of all.

    • Frederick says:

      My wife and I are building a resort on the Med coast in SW Turkey It’s a good thing my income stream presently is in Dollars and Euros since the Lira has lost a lot of value recently My Precious Metals stack hasn’t been looking a lot better lately

      Resident Gold bug

      • TheRealMRDyno says:

        A few years ago my wife and I drove from Izmer to Marmaris. Leaving Izmer, we had to pick between the big interior highway and the little 1.5 lane road carved into the coastline. We picked the little road, and that was the best drive ever. It was a few days before summer season, and there is a hard line on that it seems, because there was almost zero people around. Somewhere on that trip is a big power plant, and near that a pretty big beach, which had folding chairs out, 3-4 deep, as far as you could see in both directions – with exactly zero people. I took a video of that, it is like a science fiction movie. Anyway, that is one of the very few places I would ever visit a second time, seems like a great place for your venture.

        • Frederick says:

          We do that drive all the time as we live near Marmaris and my wife’s mother lives just north of Izmir Their are a lot of geothermal plants along that route and a couple soft coal ones as well Glad you enjoyed it We love living here after the outrageous cost of living where we were before in East Hampton , New York

  15. Neal Woods says:

    The U.S. Government has the final say on the printing of dollars.

    If the economy isn’t resource-constrained, the government can always pay for Social Security or anything else, and to everyone’s collective benefit as long as it’s keen on stopping what inflation may result with the arsenal of tools like taxes and higher interest rates at its disposal.

    It’s a matter of choice whether Social Security gets funded, not “availability of tax revenue” or your uncle’s doubts about “where the money’s going to come from.”

    • lenert says:

      Taxes don’t pay for government spending the way a business pays for its operations out of sales. If spending cuts are off the table then taxes reduce the consumption spending by the people we tax and raise it by the people tax is redirected to.

  16. Michael Engel says:

    1) Suppose the gov click 1,200 check financing it by taxing the rich. Wall street liberal speculators are going to like it.
    2) Suppose US gov 1,200 check will be financed by taxing the rich & the middle class, taxing 50M out of 160M in the civilian labor force . Most American will vote for it.
    3) Suppose the 1,200 check will be financed with the inflation tax.
    The top Pareto snake, the owners of the 80% and the poor, who vote for free money, but will be robbed by inflation, will like it today, but not tomorrow.
    4) US gov debt can be financed by the shrinking 160M civilian labor force and 100Y bonds paying higher interest rate.
    5) Those who are born today, entering the labor force in 2040 – 2050,
    will replace the aging baby boomers and industrial jobs coming back from China. There will be a lot of demand for their hands & brains. They will
    be able to buy plenty of cannibalized assets & RE coming from the dying boomers.
    6) During 2019 178M out of 160M civilian labor force paid SS payroll taxes.

    • roddy6667 says:

      Don’t plan on many jobs coming back from China. The US dollar buys 5X as much in lifestyle there. Any company coming back to the US will be buried by labor and regulatory costs, and will have to charge a lot more for the products. People won’t buy them. The company will be bankrupt in 90 days. A manufacturing process that is totally automated might survive, but will provide damn few jobs. Globalization is the great equalizer. Poor countries with low labor costs benefit the most in the increase in standard of living. Countries at the other end of the spectrum pay the price of low cost goods with loss of jobs. It’s an averaging process.

  17. Capthank says:

    You did NOT pay into Social Security. It’s a pay as you go program. Always has been. Same as Medicare.

    • Wolf Richter says:


      Sorry to hear. Where is your health insurance going to come from when you’re 75 or 85? Good luck finding private insurance and paying the premiums. And good luck paying for healthcare out of your own pocket when you get older. I wish you a totally healthy illness-free life in old age, because that’s what you will need.

      It’s possible, though. My paternal grandmother had such a life. Never got sick, never went to the hospital, and died in her sleep at age 93. But not many people can pull this off.

      • Frederick says:

        No not many can I had nearly perfect health until around age 60 when I got Lyme disease and now auto immune disease which may be related Had a routine colonoscopy and ended up in the hospital with Acute kidney injury Getting old is rough let me tell you Your grandma was very lucky

        • David says:

          I reached 65 this year….and for the first time I am starting to really feel my age…getting up with some aches and pains in my back, etc. On the other hand, I still exercise regularly, including high intensity interval training three times a week and steady state cardio other days. The intensity training has me panting on the floor after twenty minutes but I aced my echo cardio stress test the other week and my only medication is a statin as a preventative more than anything else. Its tough growing old but you can slow down the aging process. I am putting off getting my SS until 70 and already to help make ends meet I am learning to sell covered calls for extra case, and will continue practicing my profession on a part time basis to keep me going. No golf for me…not interested.

    • Dbbeebs says:

      Flemming v. Nestor, 363 U.S. 603 (1960), was a United States Supreme Court case in which the Court upheld the constitutionality of Section 1104 of the 1935 Social Security Act.In this Section, Congress reserved to itself the power to amend and revise the schedule of benefits.

  18. Petunia says:

    I’ve been looking into SS for the last couple of years. It is an extremely complicated system. I thought you just decide whether to retire early at 62 or wait until full retirement, wrong. I can’t believe all the strategies involved in making the decision, I had no idea, I don’t think the average person does either.

    The cpi calculation for the system is a complete ripoff and so is the taxation of benefits. Benefits are taxed for a couple with as little as $44K of income, disgusting.

    If the govt was serious about creating inflation the SS system is the perfect vehicle, just give more money to those who will definitely spend it. Instead they will get deflation because the retired population is growing and getting poorer.

    • Zantetsu says:

      You pay into social security with “pre tax dollars” so you get taxed on those dollars when you take them back out. And your tax rate is the same as everyone else’s, which for a married couple making 44K per year, are pretty low.

      Is the above not true? I could be wrong, I am no expert, but that’s how I thought it worked.

      If it is true, it seems pretty fair to me and not something to complain about.

      • lenert says:

        You’re thinking of a 401(K) distribution.
        Social Security payments are just regular income – which some states tax as well.

      • Petunia says:

        The amount you contribute is taxed before getting deducted, so your portion is taxed twice. The employer portion is tax free to them, a deduction, but it is your deferred compensation. They are taxing your portion twice and the employer portion once. So it’s a double tax scam.

        • Anthony A. says:

          Thanks to Pres.Clinton for the tax on SS, which the base has not been adjusted for inflation since enacted.

        • David G LA says:

          That is not correct.

        • David G LA says:

          Petunia – I stand corrected. THIS IS UNBELIEVABLE BUT TRUE!!! Thank you for outing this out. I am now disgusted.

        • Lisa_Hooker says:

          And if some entity enacts a wealth tax you will be taxed a third time on the same income. At least with a Ponzi you get a quoted rate of return. The US government just moves the goalpost around.

        • Old School says:

          I am 64.5 and single. Did a lot of research on when to take benefit. Mathematically it’s a very complicated decision that only a person good at math or a computer can solve if you have additional income and start running into different tax rates.

          There is also the issue of how you frame the problem. For example if you defer to 70 and live to 69 then you left money on the table and that can be taken into account value wise. So if you frame the problem one way taking the benefit at 62 the break even is 78 if I remember correctly and framing the problem another way the breakeven was about 90.

          For me I took it at 62 mainly because I wanted to spend socialized money, before spending down personal assets. A long enough period of financial repression might mean I goofed up. I still don’t think I would be comfortable spending down most of my financial assets so I would have a bigger check at 70 based on a government promise.

          I like using the free ORP (optimal retirement planning) on-line program which will figure draw down amounts for you and even determine at what age you should take social security to get maximum tax minimized income and which bucket spending should come from to minimize taxes.

    • lenert says:

      Galbreath, the younger, has for years been advocating lowering the retirement age to reduce the supply of excess labor thereby increasing wages.

      • Wolf Richter says:

        That has been done in Europe decades ago. Turns out, in practice, it’s a terrible idea for many reasons. And it is getting reversed bit by bit.

        • nick kelly says:

          After Greece got into the EU and went on a monumental spending and very popular spending spree, they decreed about 140 occupations ‘arduous’ enabling retirement at 55. Examples: hair dresser, disc jockey.

          For anyone who thinks Greek problems are the result of being beat up by Big Bad Germany, see ‘Boomerang’ by Michael Lewis.

  19. Ron of Ohio says:

    Another factor on social security is it pays out differently percentage-wise on different income levels. If you are lower income, it is a good deal. It has been a few years since I did the calculations, but if I remember correctly) the factors are .85 at low income, .32 middle, and .15 upper income. Also, withholding is 6.45% but if you are self-employed, it doubles to 12.9%. So for an upper-income self employed person, S.S. is a poor choice. Lower-income it is a good deal.

    • Max power says:

      Yeah, most people don’t understand (or even know about) the concept of Social Security’s “Bend Points”. Once you hit that second bend point it becomes a pretty lousy deal.

    • Wolf Richter says:

      Ron of Ohio,

      Payouts are also capped. This system wasn’t designed to provide Warren Buffett extra beer money. He hasn’t even retired yet. These two guys that run the empire are in their 90s and still at it… See what I mean? The system was designed to prevent people from sinking into abject poverty as they get old.

      • Zantetsu says:

        But there’s this weird dichotomy where on the one hand “it’s just money I paid into a forced savings program so I should get it all back with interest” and on the other hand “it’s not meant to help rich retirees, it was mean to prevent poverty in the elderly, so the returns are reduced for the wealthy”.

        These two ideas are both invoked frequently and yet they are at odds.

        • Wolf Richter says:


          It’s not a “forced savings program.” It’s a forced pension program. Huge difference.

          All pension plans work on the same actuarial basis: that a lot of people die before or shortly after retirement, like my father, at 65.5 years, along with my mother, at the same time, along with their corporate pension. The pension plan saved a huge amount of money. Actuaries calculate these probabilities and base future payouts on the math that many people pay into the system but will die either before retirement or shortly thereafter, hence never getting “their money” back, while others live to be 108, and get double their money back.

        • sunny129 says:

          ‘many people pay into the system but will die either before retirement or shortly thereafter, hence never getting “their money”

          I know lot of professionals who died before collecting their SS but some their heirs did, but NOT all.

          With Covid 19 raging, it will ‘nip out’ many elderly, premarely in the years to come, I am afraid. I belong to that risk group but not worry excessively. Hope for the best and prepare for the worst!

      • Max Power says:

        There is a cap on paying in so it makes sense for there to be a cap on paying out.

        • lenert says:

          Right, the max yearly SS tax liability is like $6k on the first $150k and you’re tax free after that so if you’re making 5m-25m you basically pay nothing. The income tax rate varies only from 12 to 35%. Workers pay for SS and medicare, millionaires and billionaires don’t.

        • Max Power says:


          From 5m-25m you basically pay nothing

          Yeah, but you also get nothing.

        • Max Power says:

          @ lenert:

          You are somewhat incorrect with respect to Medicare. There is no cap on wages subject to Medicare.

        • lenert says:

          Max – you don’t get not nothing – you get the max check like $3k a month. Sure it’s not material but even Milton Friedman cashed his checks.

          Correct on medicare – too complicated for my simple brain – plus high income earners pay the supplemental ACA/medicaid expansion tax.

  20. SC says:

    The number one source of income for most Americans in retirement is Social Security. The creation of the 401k destroyed pensions as a reliable retirement supplement for many. I propose eliminating 401ks and doubling Social Security benefits.

    • lenert says:

      Then wall street locks you into these vehicles with their special 10% early withdrawal penalty.

  21. Paul says:

    Something to ponder. The money placed into SS was gold backed prior and worth more prior to 1971

    • Frederick says:

      Worth MUCH more indeed Back when gasoline was 25 cents a gallon and I earned over 3 dollars an hour as a high school kid Let that sink in a minute and you will understand how far our standard of living has collapsed Without all the debt we would be in big trouble

      • Zantetsu says:

        Comparing the price of gas to income is like the WORST possible metric you can think of. Can you please start choosing some other cost of living other than gasoline to focus on? Gas was relatively inexpensive back then because we were completely externalizing the costs of destroying the environment.

        • lenert says:

          (and we still are).

        • Frederick says:

          OK whatever makes yo happy A slice of pizza was 10 cents and two and a half dollars today Even more extreme inflation than oil and no oil was cheap because we still had a gold backed dollar

        • Lisa_Hooker says:

          Oil was cheap because it gushed way, way up in the air when a pool was struck, until you put a valve on it. Now we’re sucking it out of rocks or steaming it from sand goo. We used up the cheap oil.

        • nick kelly says:

          The price of oil in 1970 was 3 to 4 $ a barrel.
          By far the largest factor in breaking the buyers’ cartel was the Arab- Israeli wars, and the Arab embargo on oil to the US.

          BY the time it was lifted, pricing power had transferred to the suppliers from the junkies.

        • Zantetsu says:

          Frederick, yes that’s better thank you. So you’re basically saying that minimum wage bought 30 slices of pizza back then. Today I’d say it’s more like 3 or 4. That *is* a big difference …

      • Zantetsu says:

        And by the way, the standard of living has ABSOLUTELY NOT collapsed. Life is so different now to the 1960s that it’s hard to even compare.

        The phone in your pocket now would have cost billions of dollars in the 1960s. So compared to your 1960s self, you’re already a billionaire. Not to mention the vast improvement to so many consumer products that even the most meager income now buys a standard of living – purely from a material point of view – much better than in the 1960s.

        Food is probably overall better now because we have tremendously more choices, organic became much more widespread, and people have learned to be alot more discriminating than they were back then.

        Social interactions are probably much worse though, because of social media and the way people have shut off from the kinds of community contact that used to be commonplace (kids playing in the street, etc).

        I’m not even talking about COVID, which is a special and temporary problem.

        • Seneca’s Cliff says:

          When I was a newly minted mechanical engineer in 1984 I got a job as an engineer at a portland aerospace supplier for $45,000 per year. I purchased a house for $70,000 and a brand new VW Gti for $7000. My sons friend graduated with the Same degree in 2014 and went to work in the same company in the same job in 2014, for which he was paid $60,000 The same house will now cost him $525,000 and the same car will cost him $27,000. Plus he has student loans to pay and I did not.

        • Frederick says:

          I don’t own a phone so that is irrelevant to me and yes, life sure was a lot better back then but you seem to have everything figured out so have a good day Saying that our food is superior today just shows how little you know

        • Seen it all before, Bob says:

          My experience was similar but a little different.

          I was paid 30K in 1985 as a new BSEE in S. CA. My future wife also worked and was paid about 20K. We were able to squeeze into a small house in S.CA for 200K. 4X income. No student debt since I could work half-time at a $4.25 minimum wage job and pay the entire $1400/year UC tuition bill with an extra 3K for food/books/used car/bike maintenance ($300 used car). I was lucky enough to live at home for 3 years. I wouldn’t have been able to afford the $200/month to share a rental room on minimum wage. I moved out when I got an $8/hour engineering internship.

          The new BSEE’s today are paid 80K and the exact same house is now 800K. Humanities entry-level jobs are starting at about 50K (BSRN Nurses, etc). 6X income to buy a house. A student cannot work a minimum wage job and pay the current 20K/year UC tuition bill so there is also student loan payments.
          At $12/hour, a half-time job would earn about $12k/year

          Due to housing/rent and college inflation, new grads today have a much tougher time surviving.

          Unlike in the 70’s or 80’s, nobody can pay their entire college tuition with a minimum wage job anymore.

        • Zantetsu says:

          Seneca’s Cliff you’re an outlier. I highly doubt many people fresh out of school made that much in 1984.

        • Zantetsu says:

          Fredrick, it’s easy to bitch and moan about it, but if you really liked the lifestyle of the 1960’s so much, it’s still available to you now. Just don’t take advantage of any of our more modern conveniences. It will be hard since so many of our products have increased so much in value compared to then, but I’m sure that if you just bought the worst and least reliable of any item available today, you could approximate your 1960’s standard of living. You might start with denying yourself all medical treatments invented since the 1960’s. Follow it off by buying a car that gets 15 miles to the gallon and is virtually guaranteed to die before 100,000 miles. And stick to vinyl records, radio, a 19 inch TV, and don’t watch any streaming media.

          And stop using Wolfstreet and all other internet.

      • nick kelly says:

        3 bucks an hour for a high school kid? By my rough calc of when I was paying that .25 a gal (35 in Calgary) 3 bucks would be triple minimum in places that had one. Were you a teen welder or something?

        • Frederick says:

          Nope just a lumber yard worker in NYC suburb 2.95 was minimum wage in 68 and if I scrambled I could earn 5 to 10 dollars a day in tips

        • Harrold says:

          $2.95 was 2x’s minimum wage in 1968. Unless it was a union job.

          I was paid $3.35/hr in 1988.

  22. cb says:

    Excellent article. Thank you.

  23. MonkeyBusiness says:

    The Trust Fund will survive but with inflation, it probably won’t matter unless the payroll tax goes up.

    • Max Power says:

      The payroll tax is a percent of earnings (rather than a flat amount). As such, it automatically “adjusts” to income changes.

      • MonkeyBusiness says:

        I knew that. Should have been clearer. I meant, the percentage could be raised.

  24. Frederick says:

    Draw at age 62 don’t be foolish and buy lots of gold and silver and you won’t have to worry about it anyway

    • Bobber says:

      I own some gold, but I think the most important point is to stay diversified. Any hard asset will help you counter inflation. If the asset generates an income stream, all the better.

      My opinion is that people would be wise to keep their precious metal holdings below 10% of assets.

      • Frederick says:

        You are entitled to your opinion however in this environment I would think a higher allocation than 10% would be more prudent I own real estate as well but I believe metals will outperform in the next few years by a lot I have a rather substantial cash hoard and am waiting for a pullback in metals or real estate before I go all in Patience is required

  25. Frederick says:

    That’s OK I love them so much that I planted some Avocado trees Guacamole here I come

  26. Michael Engel says:

    1) Dr. Faust : 400,000 senior citizens might perish from CV19, within
    a week of being infected, instead of normal life expectancy of 15Y – 20Y.
    2) There are 48M retired workers and their dependents on SS.
    3) Many of CV19 victims lived in expensive salt water cities.
    4) A large portion of them lived in nursing homes supported by expensive city & state pyramid financing them.
    5) The baby boomers are surfing on the big retirement wave.
    6) 400K CV19 victims out of 48M retirees will save SS for two decades.
    7) WFH will keep the elderly on co payroll. High income workers benefits are limited beyond a certain threshold. At beyond 70Y the taxmen get both. Inflation will fade decades of SS assets.
    8) SS initial booster for the poor will fade by inflation.
    9) High income should stay in the labor force as long as they can,because SS will not support their life styles.
    10) low income should squeeze the system as much as they can, before the booster fade. Since they are the majority, the retirees nation is a growing.

  27. Wes says:

    Thanks for writing this post Mr. Richter. Everyone should know how social security works. There’s just to much misinformation in the media. The U.S. Treasury definitely has a perennial buyer of their paper and at some point, J. Powell and the FOMC may have to increase interest rates to accommodate social security. As for federal taxes, my wife and I are probably going to have pay taxes on 50-85% of our social security.

    According to the tax guidelines if you are single you can have an AGI up to $34,000 and not pay federal tax on your social security.

    I told my wife that if we were to get a “legal” divorce (revoke our marriage license) and still stay married we could increase our AGI to $68,000 and not have to pay any Federal taxes on our social security. LOL

    • Zantetsu says:

      But you didn’t pay taxes on the money you put into social security to begin with (you pay your social security tax with ‘pre-tax’ dollars), so why shouldn’t you pay taxes on the appreciated amount you withdraw later?

      • Petunia says:

        That’s not true.

        • Paulo says:

          From Investopedia:

          Because Social Security is a government program aimed at providing a safety net for working citizens, it is funded through a simple withholding tax that deducts a set percentage of pretax income from each paycheck. Workers who contribute for a minimum of 10 years are eligible to collect benefits based on their earnings history once they retire or suffer a disability.5

        • Petunia says:

          When the federal govt taxes income they tax the gross amount less itemized deductions. The SS tax is not an itemized deduction.
          Example: You make 1000 a week, less SS 6%, less fed tax 10%. You bring home 1000-60-100=840, but you pay the fed tax on 1000.

        • Da is G LA says:

          Petunia is correct. I would have bet 1000 dollars that this was not the case, but I looked it up just now. Shocking. Unbelievable. Thanks Perinia for setting us straight.

        • Lisa_Hooker says:

          And this is especially painful when you are a sole proprietor or single owner of a sub-S and must pay non-deductible taxes for both sides. 12.4% for SS and 2.9% for Medicare. 15.3% on the net after allowed expenses. Then there’s income taxes on the net with SS and Medicare not deductible. But you all knew that.

        • Wolf Richter says:


          For sole proprietors, contractors, etc., half is deductible.

        • Dan Romig says:

          One of the pleasant surprises I discovered when my family seed genetics company sold our first wheat varieties, was that royalty income paid to us by our producers/dealers was not subject to FICA with holding.

          The company was my dad and myself, so we would have had the 12.4% rate.

        • Lisa_Hooker says:

          Wolf, I checked and you’re right. I forgot that. For the last years my sub-S was paying me no salary and I lived on quarterly dividends the sub-S paid me, not subject to SocSec. They closed that loophole some years ago.

      • lenert says:

        Semantics – the taxes don’t “pay for” anything. They just shift spending from one out-group to another preferred group.

        • Paulo says:

          Got it you guys. Thanks.

          In Canada, our CPP is a pre tax deduction. Mind you, CPP pays out a fraction of what SS pays. At 65 retirees then can collect Old Age |Security, another $630 on top of CPP and/or private pensions or private investments.

          CPP is supposed/designed to be 1/3 of pre retirement income, not replace working income. Plus, neither SS or CPP was designed for 15-30 years of retirement collection. They were thinking 5 years, then death. :-)

          CPP is being revised with higher contributions for higher payouts down the line, and longer payouts.

          CPP contributions are deductible, but retirement income is taxable as income depending on what rate you are in. SS seems very confusing to me.


      • Max Power says:

        Not correct. For your normal, salaried person, FICA deductions are not pre-tax, i.e., they do not reduce your taxable income.

        • Anthony A. says:

          Exactly, taxes are paid on the way in and when you collect, they are paid again (thanks Clinton) after you reach an income threshold.

          We have been paying tax on SS for over 10 years now. (Me,77, wife, 75)

      • MarkinSF says:

        Using the logic of the Wall Street 401k retirement scheme this point is valid. But the entire point of the Social Security system is to eradicate, or at least minimize, poverty and misery for our elderly upon retirement. Taxing these benefits is a move in the opposite direction. SSI benefits were not taxable until 1984 in lockstep with other significant economic moves birthed from that period that shifted the burden of supporting government more and more on the backs of workers and away from unearned income.

  28. Wes says:

    Please delete, sorry for the duplicate.

  29. CB says:

    “And I too intend to do that – keep working being fired up and having a blast at my evil WOLF STREET media mogul empire until my brain freezes over.”

    I was very relieved to read that. Thanks for your excellent blog, Wolf and thanks for this promise to continue.

  30. In favor of a positive outcome (for the fund), more people are taking early retirement, which caps the benefits. More people are dying (even before Covid). Remember in twenty years the baby boom generation will be gone. Social Security has a lot of entitlements outside retiree benefits which are redundant with state and local services. If as some speculate the Fed goes to negative interest rates the par value of those bonds will jump, while only an accounting gimmick, it will provide the catalyst for more spending. Not sure why we don’t have medicare for all, and simply clawback the clients future SSN payments. If you are really bad off and need those medical benefits the actuarial chances that will ever see what you paid in is much lower. A lot of people paying into the system will never see a dime.

    • Wolf Richter says:

      Ambrose Bierce,

      “Remember in twenty years the baby boom generation will be gone.”

      Ha, wishful thinking? In 20 years, the youngest baby boomers will be 75. At that age, they’ll have a remaining life expectancy of 11.1 years for men and nearly 13 years for women. Mid-boomers will be 85 in 20 years. Those that are still around will have a remaining life expectancy of nearly 6 years for men and nearly 7 years for women. It might take over 50 years from now on for the last boomer to have checked out.

      In other words, the boomer generation will still be here in 20 years, but it will be a lot smaller. By that time, the millennials will be the hugest biggest bulge bracket ever.

      • MonkeyBusiness says:

        And it will be the millennials’ children (Generation Z or what have you) that will be complaining about the millennials screwing them over.

    • Whatsthepoint says:

      Uh…no, not all of us, thank you.

  31. BuySome says:

    Safety nets are a real threat to that small group at the top who want to be king. As long as they are distributed in a “must be a client” fashion (ie drug/alchohol addiction, select chronic health issues, etc.) they can be limited and controlled so as not to threaten the wealth pile. Social Security is not a real safety net…it is a program of maintaining stratifications beyond the working years to ensure a status quo where the participants will fight with each other and never focus on the real problems that screw everybody in the long run. I’m afraid I can’t agree with Wolf on the you can do something else part. From what I see, with all the small improvements that came with technological advances since the microprocessor game started, the end result always ends up heading toward reduced asset values, higher taxation on everything, more spying on everybody, more rules designed to lock out those without access while protecting the controllers of rules, and wholesale destruction of entire enterprises or sectors. It never gies where you might hope. The ocean bottoms are littered with the assets of long gone empires. Probably not a good time to think of a career as merchant mariner based out of any nation…you’ll never collect those retirement benefits. And what young person needs housing, cars, or any savings when your future might be a bunk in an attack submarine as the finger pointing escalates.

    • Lisa_Hooker says:

      You made me reflect upon all that good DeLorean tooling at the bottom off the coast of Ireland. Bankruptcy does not always redeploy assets.

  32. Citizen AllenM says:

    What a bunch of funny comments.

    So many people going to get their money back.

    And yet they whine like someone might just get more.

    All this for a basic income program doing what it is supposed to do for millions of seniors.

    The loss of value due to inflation has been manageable for decades, yet the fear of the 1970s is so strong. If you are worried about the 70s show returning with a vengeance, then get some inflation protection.

    I don’t think we will see anything other than higher taxes, and that will have some effect on future economic growth. However, the covid crisis is going to end up being far larger in terms of economic damage.

  33. David Hall says:

    On August 8 Trump ruled payroll taxes are supposed to be deferred from September 1 until the end of the year.

    Trump talked about wanting to end payroll taxes a time or two.

  34. California Bob says:

    “My solution is to put money aside while working …”

    … and ‘sell’ lots of beer mugs!

    • sunny129 says:

      My advice to my children :

      You work HARD for the money in the 1st half of your life. That hard earned ‘money has to work for you’ in 2nf half. So save and invest. one check at the office and the another in the mail box!

      Don’t buy anything unless you have cash (even if you have CC). Don’t be DEBT slave for life.

      Between NEED & WANT, there is ENOUGH!

      Either you can play now and pay later or otherway if one smart!

    • Wolf Richter says:

      California Bob,

      They’re gone. No more mugs for sale. The company that did that has run out. But I still have some at my global HQ, to send out as thank-you gift to folks who donate $100 or more :-]

      • TXRancher says:

        “WOLF STREET media mogul empire”
        Might have to reconsider those annual donations. Haha.

        • Wolf Richter says:


          Thank you for you very generous donations!! But note, as of my podcast a few weeks ago, I have a new title at my media mogul empire: “head underling” ?

      • Lisa_Hooker says:

        Now that’s inflation. A collector’s item already. I’m calling Sotheby’s for an estimate.

  35. Michael Engel says:

    1) Deflation benefit retirees on SS. // inflation clip SS. // Which
    one is coming first.
    2) USD and US 10Y yield :
    3) USD PnF : reversal x3, $2 per box : 7 columns x 3 reversal x $2/ box = 42. min target : 90 + 42 = 132, which is above the 2000 highs.
    4) USD PnF : reversal x1, $1 per box :
    min targets : #1 : to 103 to Jan 2017 high. // #2 : to 125 above 2000 high. // #3 slightly higher than #2.
    5) In Sept 2020(L) USD was testing the 2018 lows.
    6) If correct, the stock markets will dive. When and how far it will go nobody knows
    7) TY weekly (UST10 note Futures, price) : rising in stepping stones since 1981. Nobody know when the uptrend stop.
    In 2020 TY jumped > June 2012 high. TY was backing up in June 2020.
    TY in a trading range for 6M since Mar 2020. The TR might cont for a while longer.
    8) If the last 6M are accumulation : TY will rise and US 10Y yield will dive. If distribution : a) a deeper backup below 2012(H), or a change of character.
    9) I am not a financial adviser.

    • sunny129 says:

      @ Michael Angel

      ‘If correct, the stock markets will dive. When and how far it will go nobody knows’

      Reversion to the mean is as natural as 4 seasons. It can be delayed but cannot be banned for ever.

      In 2008 the S&P lost nearly 60% (in 18 months)

      ‘Between 1926 and 2017, there have been eight bear markets, ranging in length from six months to 2.8 years, and in severity from an 83.4% drop in the S&P 500 to a decline of 21.8%, according to an analysis by First Trust Advisors based on data from Morningstar Inc -Investopedia

      Since there is more and record DEBT build up both in public and private sectors since 2009, expect ‘drop’ more than usual in the coming secular bear. Mkt to GDP ratio is over 170% a record! Higher they go, harder they fall!

      But. but it could be different this time, right?

  36. Ralph Hiesey says:

    Mr. v_d_b_r


    Why do you think is “welfare” such a nasty word in the USA? Why not call it “insurance.”

    Is fire insurance welfare? You pay your premium, and hopefully it goes to someone else’s welfare when they are unlucky enough to have their house burn down.

    I’m fervently hoping I’m never going to get my fire insurance money back. That’s welfare I’m very happy to pay. I’ve seen others near me with lost homes to fire, who I’m very glad they will have some of my welfare money.

    So many people complain about “welfare” it seems to me that they are saying that they are only focused on me me me–and think that nothing bad will ever happen to them.

    I’m collecting social security, but I’m lucky because I could get along without it. My life could have gone a different way. I’m glad it’s there for those who need it. I suspect there would be many more old homeless people without it.

    • sunny129 says:


    • TXRancher says:


      The other end of the argument is that welfare forces taxpayer to pay the charity. You voluntarily choose fire insurance.

      Welfare for most of world history was charity provided voluntarily by church, community, individuals.

      • sunny129 says:

        Federal, State, City, property taxes and sales TAXES are part of my Charity to the society, EVERY YEAR!

      • DawnsEarlyLight says:

        We should start a national property tax! Let’s not let the multitudes of the fiefdoms off ‘dirt’ cheap!

  37. Ralph says:

    That’s really not much of a surplus. I would call that skating by given the 150 trillion dollars in unfunded liabilities with a currently shrinking GDP.

  38. Ralph says:

    Pensions killed Rome

    • Fat Chewer. says:

      Ralph, your pants are on fire!

      • Ralph Hiesey says:

        FYI– there seem to be two “Ralph’s” talking here.

        I’m NOT the same person as the other “Ralph”

    • Trailer Trash says:

      The Antonine Plague of 165 to 180 AD killed about a third of the population and devastated the army. The case fatality rate was about 25%.

      So no pensions were needed to destroy Rome.

      The best part: the plague was brought home by troops returning from foreign campaigns.

  39. Bobber says:

    I think it’s inevitable they’ll put some type of means test on social security at some point. That would help limit wealth concentration that is harmful to the economy.

    • sunny129 says:

      ‘That would help limit wealth concentration that is harmful to the economy’

      THis is accomplished by NOT means testing, but the WEALTH tax to those who amassed fortunes by non-earned income (investments) beneficiaries of Fed’s policies favoring financialization over the productive economy!

      top 1% own more wall st wealth, than the bottom 50%-70% in our society. Mere 7 BILLIONARES have more than the bottom 50%!

      Fed is the root cause of increased income and wealth inequality since 2009. An open secret!
      Social upheavel is already on the way!

  40. Michael Engel says:

    The 40Y recession drought, – only x4 recessions since 1981/2, and not
    too deep, – might end suddenly by the hurricanes season.
    This unusual long period of recessions light will be followed by decades of recessions density and intensity. Some will be longer & deeper than the others.

  41. wkevinw says:

    The history of the Social Security is one of corruption and an out of control public assistance program. Having said that, in the ’30’s, the depression coupled with the changing of the country from agriculture to industrial work, made it practically necessary.

    It is a great turning point in the history of the country.

    Libertarians (/conservatives) have to defend not implementing Social Security and the failings of the private economy at that time. Liberals (/defacto-quasi socialists) have to defend the deception and failure of the actuarial performance of the program. It has gone from a 3% pay rate to 12%. For those that say it’s just an insurance program like a private one, would you say it was OK for your insurance company to increase the (real!) rate of your payments by 400%? There would be screaming about corporate greed.

    The future is uncertain, but as Wolf’s post says, there will be payments. They may not be worth what you wish.

    • Wolf Richter says:

      Have you checked how much health insurance premiums and healthcare costs have increased over the past 40 years?

      Private-sector healthcare and health insurance, now there’s a corruption-infested mega-scam. And tons of people have gotten immensely rich off it. Numerous billionaires have been printed by it. At the expense of everyone.

      • Thomas Wolfe says:

        Not only are premiums skyrocketing but insurers now ‘somehow’ get to arbitrarily decide what’s covered and what’s not based on opaque edicts. It’s like buying car insurance and they tell you after the fact that front end collisions aren’t covered.

      • wkevinw says:

        Wolf- correct, but different root causes.

        That’s good for a partial comparison to Medicare, which is part of the Social Security program, but again, off-topic.

        The better comparison to Social Security would be annuities or something like that.

  42. RickV says:

    As I age, my physical and mental capabilities decline, but of course I have experience and hopefully some wisdom to offset the loss. Nevertheless, at some point, leaving the labor force was necessary. Social Security is one of the great inventions of the United States system that assist in this process, because it supports those of us who have contributed to the nation’s success. When implemented properly, leaving the labor force is not retirement, it’s attaining financial independence. Nowadays I don’t work for another. But occasionally I do invest/speculate and less often make some money which tells me I can still compete to some degree, at least. I ain’t dead yet.

    • Bobber says:

      Good insight. People need to save enough early on to prepare for possible workforce displacement in their 50’s due to age discrimination, health, and inability to work for young know-nothing overly-ambitious dimwit supervisors.

  43. Thomas Wolfe says:

    Reminds me of the Venezuelan woman who held up a plantain at her local market and said, “I paid as much for this as I paid for my house.” Social Security doesn’t need to be funded; COLA’s just need to continue falling far behind inflation. Which we all know is one of the Fed’s hidden mandates.

  44. Mike smith says:

    Enjoy reading your economic truths. A while back a fella on tv said the real debt combing all state and federal future pensions, Medicaid/Medicare, intrest on debt, social security ect. This was stated around 240 trillion dollars. This seems an insolvency unresolvable. Thrift seems a distance star.

  45. Ozz says:

    For those that want Social Security to go away the fact is it brings in more money to the USG then corporate taxes. It may be the second highest source of revenue for the USG (all payroll taxes included). If we end Social Security (SS) there will have to be a big tax increase on income or corporations. The USG is not going to do with less money. Politicians never say get rid of SS contributions they just want to reduce the payments. One way to make SS whole is end the cap on payments.

    As much as commenters talk about debt it has yet to become a serious issue in the last 40 years. I am to the point that it doesn’t really matter other then a flag to rally around. Unless there is a plan to pay it back it never will be paid. The empire is starting to fade as are any realistic thoughts of paying off the debt. It aggravates any common sense we collectively have but we continually want more spending that includes individuals, corporate welfare and USG procurements. Maybe the MMT crowd is right!

  46. TinyTim says:

    Wolf is the only one I have read who has shared this information. I run into people all the time who say they are waiting until full retirement so they can receive a bigger retirement check.

    They fail to realize it will get eaten away by inflation and a debasement of the currency. So if a person can live on less it might be wiser to take early retirement.

    • Wolf Richter says:


      Food for thought: Inflation eating into your payments starts as an issue when you start drawing payments. The longer you draw payments, the bigger of a problem it becomes. It’s not a huge issue over the first few yeas. But if you draw payments for 10, 20, 30 years, it will become a bigger issue as you go.

  47. Michael Engel says:

    1) TY monthly RSI was extreme @ 77.16, in July 2020.
    2) SPX backbone was created by the 1998 hi/ lo.
    3) In Sept 1998 TY RSI was extreme @ 75.2. It led to TY monthly spring, a year later – to TY bottom and to the Nasdaq dotcom top, – in Jan 2000 when RSI was @ 18.4. During the 2000/2003 recession TY was up.
    4) In Mar 1986 TY RSI peaked @ 79.54. After a Bearish Divergence, a year and a half later, RSI dropped to @ 38.62. it led to the Oct 1987 collapse.

  48. JK says:

    Wolf! IMHO, this is the best advice you have ever given! That’s right, work doing something you like to do until you can’t! I work in medical field and the worst thing anyone can do is sit around and not use your mind. You’re talking dementia, heart disease, depression, etc. I’m 56 y.o. and work part-time in medical, full time as a real estate investor, and now looking to possibly start a medical related internet mail order business. I see people talk about Warren Buffet retiring. What’s he going to do? Buddha talked about walking the middle path. Travel while you are working i.e. take a vacation. Find a hobby. I’ve been travelling around the world and North America since I was 18 on my own, and other times with my ladies. So many people want to do this when you retire. This is foolish! Do it while you are healthy and walking, and do something you are passionate about. Great advice Wolf!!!

  49. Chris Herbert says:

    Interesting stuff, but I couldn’t bear reading it all. Congress puts into the SS trust fund whatever it wants to put there and sets whatever interest rate it wants to set for the Treasuries. This is left pocket, right pocket, same pants bookkeeping. Congress owns the Treasuries. It pays out the interest to itself. And it is all accounting/bookkeeping. The taxes that ‘pay for SS’ disappear once they are accounted for. The federal government has no need for your taxes. If you actually paid in real cash, they’d have to burn the stuff! This is fiat money. Learn what that means. The economy runs on dollars Congress creates every time it pays a bill. That is where dollars came from that get into your pocket. You need them to pay your taxes. Which is the only reason there are taxes–to take your dollars away. Unfortunately, we don’t take enough dollars away from our billionaire class, so they run the entire show. No commercials, but plenty of propaganda.

    • Wolf Richter says:

      Another one who thinks that the SS Trust Fund isn’t real because it’s not divided up into boxes with names on it and with $100 bills inside, and each time you make a contribution, someone sticks your contribution in form of some bank notes into your box for safekeeping, hahahahaha…

      Get real. My own brokerage account is all just “bookkeeping,” debits and credits, etc. My account with, which has Treasuries in it, is exactly the same, debits and credits, digital bookkeeping. There is nothing else there. The 1,000 shares of Apple you might own… that’s just an electronic entry in your electronic account. Debits and credits, nothing more.

      That’s how the modern financial system works, debits and credits, in other words, a form of digital bookkeeping. Treasuries are just like any other securities, such as stocks, or other bonds, they’re all just debits and credits. The SS Trust Fund is no different. You need to get used this concept. It has been around for a long, long time.

      • VegLov says:

        Stupid question – At the risk of sounding like an MMTer: Since it is the Federal Government, can’t Congress just change the law to allow Social Security to carry a negative balance on its Social Security sheets? I have over-drafted before. Maybe not on a permanent basis. Might not make much interest though…

        • Wolf Richter says:

          No law needed. If the Trust Fund is depleted, and the SSA takes in less money than it pays out, there is no issue with paying it, and the difference is simply reflected in the overall budget deficit (raises it), like the surplus now is also reflected in the budget deficit (lowers it).

  50. Anthony Pagano says:

    I’m trying to figure out how the SS Trust Fund increased its holdings from the end of fiscal year 2019 to the end of fiscal year 2020. How is this possible when between 20 million and 50 million taxpayers have been out of work since April——and presumably weren’t paying OASDI withholding. The last report Wolf Street ran on the numbers drawing unemployment benefits was still just above 20 million. I didn’t think states were withholding OASDI taxes from unemployement benefits?

    I’d also have to guess that a significant number of Baby Boomers who lost their jobs and were eligible for SS Old Age benefits prematurely jumped on the benefit roles. So how did the SS Old Age Balance Sheet end up slightly in the black?

    • Wolf Richter says:

      Yes, this is an interesting question. One thing you have to keep in mind: many of the laid-off workers were near the bottom of the pay scale and didn’t pay that much into the system.

      • Anthony Pagano says:

        If, for the sake of argument, we assume that only 25 million were out of work for 6 months grossing $20k/year then the OASDI Trust Fund lost $15.5 billion dollars between Apr 1st and Sep 30th.

        And the reported number of total taxpayers (178 million) doesn’t jibe either. The Social Security Admin shows that the taxpayer-to-SS Beneficiary ratio in 2013 was 2.8 and has been slowly dropping. With 54 million people on the SS Old Age benefit roles this puts the total number of taxpayers BEFORE the March collapse in employment at not much better than 151 million.

        The SSA also reported that the 2013 taxpayer-to-beneficiary ration of 2.8 was the balance point between Old Age Expenditures and Revenue. While the prime taxpaying population in the US is still increasing, its RATE of increase is dropping and it has been overtaken by the rate of increase in the population of those 65+ which is climbing.

        I’m not one of the Chicken Littles here, but as Gen Omar Bradley told Gen Patton in the WWII Sicily Campaign, “I can read a map.”

  51. max says:

    Assume you work from age 22 to 67 and make only the median family income during your career. In this case your Social Security contribution will be about $3,000 a year, recognizing that you will generously help your employer with his contributions to your Social Security by accepting wages lower than you would otherwise have received. These contributions will make you eligible for Social Security payments at age 67. How much will you get? The maximum you can receive (as I write this) is $23,868, which assumes that your spouse is still alive, or at least appears to be, and also 67 or older. When you are 67, 45 years from now, the payments will be higher, assuming they keep up with inflation (your Social Security contributions will also increase with inflation, but let’s ignore that minor inconvenience). Let’s be optimistic and assume they will. Assuming a 3.1 percent inflation rate (the average over the last 70 years), then your annual income from Social Security will be $91,453 at age 67. And you thought Social Security was a lousy deal.

    I’m tempted to rest my case right here, except someone is probably asking, “But how better off would I be if, instead of contributing to Social Security, I put the $3,000 a year into the stock market for the next 45 years? At the risk of encouraging people to think of Social Security only in crass financial terms, I will answer this question.

    Over the last 70 years the stock market (as measured by the Standard & Poor’s 500 index) has grown at an average annual rate of 10.9 percent. At that return, your $3,000 a year will be worth $3,182,779 when you are 67. With that amount of money, you could buy a lifetime annuity that pays over $356,000 a year. So a cynical, but completely accurate, conclusion is that the Social Security system will bamboozle you out of over $264,547 a year (the difference between $356,000 and $91,453) during your retirement.

    • Wolf Richter says:


      You would have to be totally nuts to put all your eggs into one risky basked at age 67. TOTALLY NUTS, is more accurate.

    • Lee says:

      After reading some of the comments about US Social Security here, I really have to wonder about the so called ‘intelligence’, ‘knowledge, and ‘education’ of people.

      First of all, the best place to get information and correct information is from the US Socail Security web site.

      Second, once you read up on that THEN comment: get your ducks in a row.

      Third, the rules about Social Security can be quite complex and the calculations very difficult depending on your circumstances. This is even more difficult if you are married to a foreign national, their nationality, and where YOU live.

      Here is the link to the latest Social Security FACT SHEET – READ IT!!!

      The MAXIMUM payment benefit shown in the FACT SHEET FOR 2020 IS US$3011 per month

      (Above statement:

      “How much will you get? The maximum you can receive (as I write this) is $23,868” is wrong.

      And not one person in any of their comments stated that if you take social security early retirement benefits you are subject to a reduction in benefits if your income exceeds a certain amount.

      Generally this is US$18,240 a year for people in the USA. (If you live outside the USA, you are subject to different rules.) You lose 50 cents for each dollar income above that amount until you get zip!!!

      Early retirees outside the USA are subject to a hourly work limit of 40 hours per month. Work 40 hours and one second and you lose the entire month’s payment. The definition of work includes ‘vacation time’ too! For those outside the USA and on early retirement there is no income limit!

      Once you reach full retirement age the limits disappear.

      You can make $US100,000 a year or even $1 million a year as long as you don’t work more than 40 hours per month and then only that month’s payment will be stopped.

      And for those that think Social Security should be means tested, here is an example.

      Mr Joe Biden and his wife released their Federal Tax returns for 2019. Here is the link so that you can see the numbers :

      Their combined taxable income was around US$940,000. Of that they received US$52,595 in combined Social Security retirement benefits of which US$44,706 was counted as taxable income. They also had another US$194,000 in pensions and annuities.

      Mr Biden’s Social Security benefit for 2019 was a total of US$35,069.

      Of course, they also had income from wages and paid around US$36,000 in Social Security and Medicare tax.

      So please educate yourselves………………………

      • Petunia says:

        Once you reach full retirement age, there is no earnings cap on wages or hours. This cap exists only in the year you reach full retirement age and only for the months you worked before full retirement age.

        Your comment shows how complicated the system can be. I have researched this for the last two years and still don’t know enough.

        • Lee says:

          Yes, the typical ‘simple’ system of retirement that has become a paperwork and bureaucratic nightmare for people and made even more complicated if you differ from the norm by living outside the USA, being married to somebody from another country, or being a foreign national.

          The early retirement penalty for doing ‘work’ that reduces your social security payment, but one that ignores income from capital gains and dividends discriminates against the lower and middle income class as they have limited ability to generate income from other sources.

          USA early retirement is in a way like the Australian system that also discriminates against working income, but allows other sources of income to to made from interest, dividends, and capital gain without affecting your payments (subject to asset tests through).

          For those either living outside the USA or thinking of moving to another country, here is the place for resource material:

          A direct link to the SSA pdf:

          And a payments tool:

          “This is a tool to find out if you can continue to receive your Title II Social Security payments if you are outside the United States or are planning to go outside the United States. This tool will help you find out if your retirement, disability, or survivor’s payments will continue indefinitely, stop after six consecutive calendar months, or if certain country specific restrictions apply.”

          For example:

          “If you are not a U.S. citizen or you do not meet one of the conditions for continued payments, we will stop your payments after you have been outside the United States for six full calendar months.”

          Oh, and sorry, the number of work hours per month is 45, not 40.

      • max says:

        (as I write this) is $23,868”

        it is written in:

        Thursday, September 1, 2005

        “beauty” of any government laws is that are always change, and they are so complex that can be interpreted many different ways.

  52. Harvey Mushman says:

    What a hot topic!!!
    233 comments in two days!
    Like a 9.0 on the Richter scale.

  53. Miles says:

    I love u Wolf

Comments are closed.