The Social Security Shell Game

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.”

More government shells in the game

Wolf Richter tells us the Social Security Administration paints a rosy picture of the Trust Fund:

“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.

Social Security Trust Fun Levels Off

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…. The Trust Fund purchases them at face value, and the US Treasury redeems them at face value.

…. 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.

…. 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:

Fed's Interest Rate Repression at Work Chart

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.”

So far so good – by what measure?

Hard-working Americans have been paying into their retirement fund over their working career. The government spent the money to pay current bills and put Treasury Bonds into the fund.

The US Debt Clock lists Social Security promises as “unfunded liabilities”, meaning there is no money, only politicians’ promises to pay current and future retirees. Currently, it is approaching $21 trillion, in addition to $32 trillion in Medicare Liabilities.

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