Guessing Social Security

Which way will Social Security go? Will it run dry if it follows its present course, or is it in fine shape? You can find predictions for both, backed up by figures. While I’m more inclined to believe the pessimistic prognoses, I really don’t have the knowledge to pick one with confidence.

It really doesn’t matter, anyway. Social Security isn’t a business that will go broke if it can’t meet its obligations. Its “trust fund” is an accounting fiction consisting of the government’s obligations to itself. The real bottom line is that the ratio of people collecting to people paying increases with people’s longevity. This means that recipients will get less or people being taxed will pay more. If the trust fund goes broke, Congress will abandon the model, converting Social Security from a nominal Ponzi scheme to an overt welfare program. For most purposes, it’s already the latter.

This means that barring a major economic collapse or political shift, we can expect to get back some of our money if we live long enough. We shouldn’t count on those numbers which the government sends us in the mail, though. Congress can change things according to the political winds.

It would be logical to increase the age at which people start collecting; when Social Security started, people at age 65 were mostly within a few years of death, but now people often live to 80 and beyond. The AARP, however, has put its lobbying muscle behind keeping the age the same, and most political decisions follow the logic of getting re-elected, not the logic of economics. Maybe it will remain possible to start collecting at age 65 but will be a really bad idea. This is already true to a degree.

I’m not counting on Social Security in my retirement plans. If I manage to get back some of my money, that’s an extra. I’ve made sure to save enough that I won’t starve without it.

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