The Fed Is Systematically Destroying Social Security And The Retirement Plans Of Millions

ilene's picture

The Social Security trust fund needs to earn interest to achieve levels that will preserve it till 2033; with interest rates close to zero, the trust fun is projected to be depleted ten years earlier - by 2023. By law, the money deposited in the SS trust fund must be invested in U.S. government securities, so it cannot just be thrown into the stock market. In order for SS Ponzi to work, the trust fund, invested in government securities, needs to produce healthy returns. It won't; it can't. Thanks QE-genie Bernanke. ~ Ilene 

The Federal Reserve Is Systematically Destroying Social Security And The Retirement Plans Of Millions Of Americans

Courtesy of Michael Snyder of Economic Collapse

Last week the mainstream media hailed QE3 as the "quick fix" that the U.S. economy desperately needs, but the truth is that the policies that the Federal Reserve is pursuing are going to be absolutely devastating for our senior citizens. By keeping interest rates at exceptionally low levels, the Federal Reserve is absolutely crushing savers and is systematically destroying Social Security. 

Meanwhile, the inflation that QE3 will cause is going to be absolutely crippling for the millions upon millions of retired Americans that are on a fixed income. Sadly, most elderly Americans have no idea what the Federal Reserve is doing to their financial futures. Most Americans that are approaching retirement age have not adequately saved for retirement, and the Social Security system that they are depending on is going to completely and totally collapse in the coming years. 

Right now, approximately 56 million Americans are collecting Social Security benefits.  By 2035, that number is projected to grow to a whopping 91 million.  By law, the Social Security trust fund must be invested in U.S. government securities.  But thanks to the low interest rate policies of the Federal Reserve, the average interest rate on those securities just keeps dropping and dropping.

The trustees of the Social Security system had projected that the Social Security trust fund would be completely gone by 2033, but because of the Fed policy of keeping interest rates exceptionally low for the foreseeable future it is now being projected by some analysts that Social Security will be bankrupt by 2023.  Overall, the Social Security system is facing a 134 trillion dollar shortfall over the next 75 years.  Yes, you read that correctly. The collapse of Social Security is inevitable, and the foolish policies of the Federal Reserve are going to make that collapse happen much more rapidly.

The only way that the Social Security system is going to be able to stay solvent is for the Social Security trust fund to earn a healthy level of interest.

By law, all money deposited in the Social Security trust fund must be invested in U.S. government securities. The following is from the official website of the Social Security Administration....

By law, income to the trust funds must be invested, on a daily basis, in securities guaranteed as to both principal and interest by the Federal government. All securities held by the trust funds are "special issues" of the United States Treasury. Such securities are available only to the trust funds.


In the past, the trust funds have held marketable Treasury securities, which are available to the general public. Unlike marketable securities, special issues can be redeemed at any time at face value. Marketable securities are subject to the forces of the open market and may suffer a loss, or enjoy a gain, if sold before maturity. Investment in special issues gives the trust funds the same flexibility as holding cash.

So in order for the Social Security Ponzi scheme to work, those investments in government securities need to produce healthy returns.

Unfortunately, the ultra-low interest rate policy of the Federal Reserve is making this impossible.

The average rate of interest earned by the Social Security trust fund has declined from 6.1 percent in January 2003 to 3.9 percent today, and it is going to continue to go even lower as long as the Fed continues to keep interest rates super low.

A recent article by Bruce Krasting detailed how this works. Just check out the following example....

$135 billion of old bonds matured this year. This money was rolled over into new bonds with a yield of only 1.375%. The average yield on the maturing securities was 5.64%. The drop in yield on the new securities lowers SSA’s income by $5.7B annually. Over the fifteen year term of the investments, that comes to a lumpy $86 billion.

So what happens when the Social Security trust fund runs dry?

As Bruce Krasting also noted, all Social Security payments would immediately be cut by 25 percent.....

Anyone who is 55 or older should be worried about this. Based on current law, all SS benefit payments must be cut by (approximately) 25% when the TF is exhausted. This will affect 72 million people. The economic consequences will be severe.

In other words, it would be a complete and total nightmare.

Sadly, the truth is that the Social Security trust fund might not even make it into the next decade.  Most Social Security trust fund projections assume that there will be no recessions and that there will be a very healthy rate of growth for the U.S. economy over the next decade.

So what happens if we have another major recession or worse?

And most Americans know that something is up with Social Security.  According to a Gallup survey, 67 percent of all Americans believe that there will be a Social Security crisis within 10 years.

Part of the problem is that there are way too many people retiring and not nearly enough workers to support them.

Back in 1950, each retiree's Social Security benefit was paid for by 16 U.S. workers.  But now things are much different.  According to new data from the U.S. Bureau of Labor Statistics, there are now only 1.75 full-time private sector workers for each person that is receiving Social Security benefits in the United States.

And remember, the number of Americans drawing on Social Security will increase by another 35 million by the year 2035.

Another factor that is rapidly becoming a major problem is the growth of the Social Security disability program.

Since 2008, 3.6 million more Americans have been added to the rolls of the Social Security disability insurance program.

Today, more than 8.7 million Americans are collecting Social Security disability payments.

So how does this compare to the past?

Back in August 1967, there were approximately 65 workers for each American that was collecting Social Security disability payments.

Today, there are only 16.2 workers for each American that is collecting Social Security disability payments.

The Social Security Ponzi scheme is rapidly approaching a crisis point.

Sadly, the Federal Reserve has made it incredibly difficult to save for your own retirement.

Millions upon millions of Baby Boomers that diligently saved money for retirement are finding that their savings accounts are paying out next to nothing thanks to the ultra-low interest rate policies of the Federal Reserve.

The following is one example of how the low interest rate policies of the Fed have completely devastated the retirement plans of many elderly Americans....

You can understand the impact of the invisible tax on the elderly by watching the decline of interest income from $50,000 invested in a five-year Treasury obligation. As recently as 2000, this would have yielded about 6.15 percent and an interest income of $3,075 a year. Now the same obligation is yielding 0.7 percent and an interest income of $350 a year. This is the lowest yield on this maturity of Treasury debt since the Federal Reserve started keeping an index of the yields in 1953.

But it's more than a low interest rate. It's an income decline of nearly 89 percent in just 12 years.

And after you account for inflation, those that put money into savings accounts today are actually losing money.

Of course most Americans have not saved up much money for retirement anyway.  According to the Employee Benefit Research Institute, 46 percent of all American workers have less than $10,000 saved for retirement, and 29 percent of all American workers have less than $1,000 saved for retirement.

Overall, a study conducted by Boston College's Center for Retirement Research discovered that American workers are $6.6 trillion short of what they need to retire comfortably.

So needless to say, we have a major problem.

Baby Boomers are just starting to retire and the Social Security system is still solvent at the moment, and yet the number of elderly Americans that are experiencing financial problems is already soaring.

For example, between 1991 and 2007 the number of Americans between the ages of 65 and 74 that filed for bankruptcy rose by a staggering 178 percent.

Also, at this point one out of every six elderly Americans is already living below the federal poverty line.

So how bad are things going to be when Social Security collapses?

That is frightening to think about.

In the short-term, millions upon millions of retired Americans that are living on fixed incomes are going to be absolutely crushed by the inflation that QE3 is going to cause.

Just like we saw with QE1 and QE2, a lot of the money from QE3 is going to end up in agricultural commodities and oil.  That means that retirees (and all the rest of us) are going to end up paying more for food at the supermarket and gasoline at the pump.

But those on fixed incomes are not going to see a corresponding increase in their incomes.  That means that their standards of living will go down.

Things are tough for retirees right now, but they are going to get a lot tougher.

Right now, there are somewhere around 40 million senior citizens.  By 2050 that number is projected to increase to 89 million.

So how will our society cope with more than twice as many senior citizens?

Sadly, we will likely never get to find out.

The truth is that our system is almost certainly going to totally collapse long before then.

We are rapidly approaching a financial crisis unlike anything we have ever seen before in U.S. history, and the foolish policies of the Federal Reserve just keep making things even worse.


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cbhattarai's picture

This ensure that you get the best surveillance and security

TrumpXVI's picture

I hate those crappy publicity photos we're inundated with.  Doesn't anyone ever get a properly photographed publicity still photo anymore?  The kind where the photographer actually knows something about portrait lighting; "Rembrandt lighting"; sheesh. And a "hair challenged" guy like the Chairsatan doesn't need any key lighting on the top of his head either!

Don Levit's picture

As stated previously, the interest in the trust fund is irrelevant.  Even if the interest were 6% instead of 2%, all that means is that the numbers would go to zero at a later period of time.

From a cash flow persoective, since 2008, when the interest had to be redemed to make up for the cash shortfall, new general revenues were needed, just like all other pay-as-you-go government expenses, like Medicaid.

Unfortunately, there was no budget surplus in 2008, so instead of general revenues redeeming the interest, it was redeemed with additional debt held by the public.

From a cash perspective, the trust fund will not be exhausted in 20 years.  It is exhausted now.

Don Levit

lesterbegood's picture

“S.I. 1997 NO.1778: The Social Security (United States of America) Order 1997, made 22 of July 1997, coming into force 1 September 1997, at the Court at Buckingham Palace the 22 day of July 1997.  Now, therefore Her Majesty in pursuance of section 179(1)(a) and (2) of the Social Security Administration Act of 1992 and all other powers enabling Her in that behalf, is pleased, by and with advise of Her privy Council, to order, and it is hereby ordered as follows: “This Order may be cited as the Social Security (United States of America) Order 1997 and shall come into force on 1 September 1997.”

If you want your SSI, ask the Queen.

lesterbegood's picture

My personal opinion is that QE 3, 4, Eternity, whatever is nothing more than hot air and hype. I believe that the FED no longer has the ability to create FRNs. I have no proof to offer to support this thesis. Just a hunch. Time will tell.

Boxed Merlot's picture

My personal opinion is that QE 3, 4, Eternity, whatever is nothing more than hot air and hype...


Actually, Ben is committed to exchanging frns at the rate of 1 million a minute from now on for real estate ownership rights of United States land and improvements.  The people of the United States are evidently thrilled and thankful to have such a benevolent master that is willing to exchange ethereal currency and electronic cyphrages placed at will in international financial institutions for the land mass previously owned by the Land of the Free.

NEOSERF's picture

By law, the Social Security trust fund must be invested in U.S. government securities.

Cmon Ilene, you haven't been paying attention to Europe...there are no "laws" or even "rules" when faced with saving the simply ignore or change them.  Thus, benefits will be cut, emergency bonds will be sold, beginning age to receive monies will be increased and all will be well through 2100

roadhazard's picture

I'm glad someone else finally noticed, thank you.

lynnybee's picture

wake me up when they start paying interest on my savings on deposit; until then, it's silver hidden in my bunker.   i play nothing with any government anymore.    we are being run by a bunch of criminals on WALL ST. & at the highest levels of the U.S. GOV'T.

q99x2's picture

It is astonishing to see how many retirees are in the Southern California marathons. They are a formidable army of people that have nothing better to do than to die for a cause. I wouldn't screw with seniors if I were a bankster.

Widowmaker's picture

Good ol Ben, the perfect "bad cop" for the bait and switch of a century.

Bank-racketeering Inc doesn't care, they will fuck everything. Fuck the elderly, fuck the poor, and most of all FUCK YOUR KIDS!

When they are old enough Aurora will be a walk in the park and the rest of fuck-up America can stand around with their eyes closed and thumbs up their asses repeating "no one saw it coming" over and over.

Let's hear how it's the politicians fault, Ben Shalom - ANYONE but the Federal Fuckup Cartel.

Shevva's picture

Funny enough just seen this as a user name on another site.

'Children are for life, not just for benefits.'

mrdenis's picture

Chickens coming home to roost baby !

bigbwana's picture

The FED/BOE are owned by the Illuminati and one of their aims, in their evil quest for a NWO, is to destroy the global economy. Meanwhile, they poison our foods, and our skies, with chemtrails. They will NOT succeed. All, and they know it, will pay for their crimes against humanity. Promise the Galactic federation, who come in God's name, and cannot tell a lie. Spread the Light. The Love. The Dark have been defeated!

Offthebeach's picture

Some plans are more equal than others.
Actually, muppets have no plans, only orders to obey.
Progressive Leader Principal governing demands it. Be a Hero Muppet, they'll name a domestic surveillance centers cafeteria after you.

devo's picture

Bullish for magnesium fire starters.

magne13's picture

Ok great article and yes the math is correct and yes the SS and our financial system is a ponzi scheme.  However when considering bonds lets not simply look at yields alone.  there is capital gains and or capital losses as well in the interim.  For instance, lets assume that the same $135Bln that is now invested at an annual yield of 1.37% as the article states.  Lets assume that the FED (which it will) continues the Zirp over the next two years.  This will drive the average investable yields most likely to a new 0.525 average yield or a drop of 84.4 basis points.  With a Dv01 of nearly $22mln this would mean that the bonds that the SS fund bought will now show a capital gain of nearly $1.9Bln.  this is not adding the semi annual coupon payments or over the life of those 2 years which would amount to another $3.7Bln in essence, the entire difference or $5.6Bln in interest lost would be made up from the capital gains in the lower rates or higher prices in the bonds in the portfolio.  This is the true essence of the Treasury, FED Ponzi scheme.  Whereby they keep status quo, all the while stealing future generational wealth and masking it with their inflation mechanism or QE programs.  As long as the FED continues with the Ponzi of buying all bonds this scheme buys time and it is a self feeding Zero rate policy in which there is no return.  Rates can never go higher, only debts can grow higher, rates can only go lower.  The game is up if and when the completely moronic global society decide to live within their means.  The end result----third world status and standard of living destruction for 90% of the globe, including America.

bunnyswanson's picture

"The game is up if and when the completely moronic global society decide to live within their means. The end result----third world status and standard of living destruction for 90% of the globe, including America."


Lack of decent jobs is what has led to man not being able to even pay for the necessities of life.  The credit extension was over the top, meant to indebt Americans, keep them drunk with consumerism, opening up new shops and keeping them open 24/7, with huge selections and low low prices.  It was a scheme to do exactly what it did.  This entire situation we see around us was designed to transfer wealth now and for decades to come in the form of tax hikes and a burden that will possibly displace millions into a position of having no ability to earn a wage.


Politicians who granted their constituents every wish if they'd only vote for them are responsible.  They'd grasped globalization at the cost of the citizens.  Ignoring the pleas for help or worse, responding with contempt and accusations, is a mindphuck, a ploy to justify in the masses mind with group-think, stoning to death the victims. 


It's so absurd I can only say vast sums of money must be exchanging hands for this to have continued as long as it has.  Or the maestroes are counting heavily on the Mayan calendar, perhaps.  Madness surrounds, and this has nothing to do with common people.  This is globalization and a redistribution of wealth, without regard for the very real consequences off great suffering that comes with it.  Crimes against humanity is what this is and the morons are the politicians, and their benefactors, and they of course are perpetrators, not the citizens.

OneTinSoldier66's picture

When it comes to the Government 'Trust' and 'Fund' are two words combined that can't make sense.

SmittyinLA's picture

Gosh!  No wonder my asshole is sooo sore.

Offthebeach's picture

If you ask, nicely, eyes on the floor, they'll scedual you for a lower GI colostomy and they'll do you through there. It's easier, quicker for them, they can do groups, and it reduces Muppet whining which as you can image really annoys them.a's picture

It is my understanding that there is no pot of money designated as the Social Secuity fund, but rather it is a book keeping entry and the money is made available on a pay as you go basis.  If this is so, then there are no worries, because the Fed/Treasury will make the money appear by magic.  What that money will be able to purchase is unknown, but it will be made available, even if it is of very low quality, i.e. asymptotically approaching zero.  Don't worry, be happy

Bicycle Repairman's picture

The GOP needs a new wedge issue badly.  Since they seem hell bent on alienating Ron Paul supporters and paleo-conservatives, they need to find millions of voters somewhere.  I believe the GOP wants to float "generational warfare" as an issue and see if that works.  Good luck to them.  Between that and their absurd outreach to Hispanic voters, I predict permanent rump party status for the GOP.  They're done, and good riddance.

JuicedGamma's picture

I won't attack on you personally; this assanine political fighting is exactly how we ended up with Social Security being bankrupt.  Neither party is capable of moving on the issue so they keep kicking the can down the road.

It's wrong and will end badly. But for now politicians in both parties can keep getting elected.  Social Security may get straightened out eventually after a lot of pain and many years (don't bet on it).  Remember this prediction, neither political party will survive the fallout.

Blaming the Fed is also not looking deeply enough at causation. Underlying it is the propensity of politicians to spend on their constituency once elected.  The most powerful is funded and driven by AARP.  So please burn your AARP cards, this is an evil institution that is bankrupting America.  The politicians have called Social Security a lock box, but this is not accurate.  All that is locked is the investment made, the money has been raided and moved to the General Fund.  It will never be paid back.

One of the reasons interest rates are being kept so low, and must now never be raised, is that raising  them now would cause a catastrophic rise in interest payments.  This is not the Fed's doing.  Once again the silly politicians have spent so much money that they cannot repay it.  Just imagine you ran up 1 million on your credit card.  If you paid 1% interest and never paid any principal back, you would be paying $833/month on it.  That's what the government is doing right now.  Piling on new debt, not making any principal payment (in fact ballooning the principal) and borrowing money to pay the interest.

This must end badly.  It is only a matter of time before fiat currencies will die and only hard assets will survive into the new world order that will result.  Both political parties will cease to exist; it may be even more catastophic, the republice may cease to exist in it's current form.


bunnyswanson's picture

America will be on the auction block, selling it's prized possessions to  industrial tycoons from around the globe.  Getting the life we once had back is going to take a sterilization event and a couple million years.  Creating chaos on top of the already felt misery that comes with desperation seems to one of the weapons and a very effective one.

Vlad Tepid's picture

I thought San Francisco Democrats were the rump party?

Bicycle Repairman's picture

Actually the Republican party is the closeted wide-stance Rump party.

dlmaniac's picture

Personal retirement should have never been managed by government whose track record is managing everything into insolvency.

nah's picture

he just wants to give everyone $200,000 over the next 25yrs

earnyermoney's picture

I'll bet this article would have blamed Bush if he were still in office instead of Bernanke. Barry rehired this terrorist. Barry told him to print money to save his arse. No one holds this arsehole accountable. I'm voting 3rd party but want Barry to win so that he suffers the blowback from all the shite he's stirred the past four years.

nathan1234's picture

The Living Frankenstein

Dr Ben Shalom Bernanke


Just Observing's picture

Oh bullshit.....they aren't gonna cut SS one thin dime.  Alan Greenscam already told CONgress that they could guarantee payments forever.....and they will.

Purchasing power ?  Alan said "Eh, not so much....."

mendolover's picture

Edit:  I swear I only hit SAVE once!

mendolover's picture

It's fun to bag the man in lieu of a president.  I'm no fan.  But this shit goes way farther back than BO or GWB (but not daddy B).  To me this is more proof that there is a hell, and there will surely be a very special place there for these motherfuckers.

rbg81's picture

You know that when Social Security collapses, AARP will run commercials telling seniors how privileged they should feel to be sacrificing for their country. [/s]

edifice's picture

AARP will also run ads asking seniors to further sacrifice, by converting all of their 40x accounts into Treasurys.

Bicycle Repairman's picture

The benefits will be paid.  Does anyone honestly think that the FED won't print up the $ as needed? 

And the Koch controlled CATO institute can go fuck itself.

Offthebeach's picture

The Koch grow, store, transport and process food. They'll do fine at even $1,000 Federal Reserve paper dollars for a single donut. Senior Citizens, (fast on the way to join Indian reservation and welfare ghetto end game condition that all government cost holes end up as, )not so well.

Antifaschistische's picture

Sure...they'll print it up.  That's not the point B.R.  I tell people this all the time that have faith in their pension program that's 10-25 years from payout.   The risk, that the fund itself will become bankrupt is one risk...set that aside for a minute.  The other risk is that receiving your $6,000 comes in just like promised.  Yet, it take $400 to fill up your gas tank and a watermelon cost $30.   

This is the risk...future retirees will not be able to do crap with their retirement income.  no traveling the globe.  no spoiling the grandkids with their disposable income.  There will be no disposable income.  Low income housing projects will rise up to house all these retirees and it won't be in San Diego.   It will be in Huron, South Dakota and other places that are less than desirable for retirees who hate cold weather.

It's coming, and it is courtesy of the FED.   I tell all future pension recipients that they better protect their dollar denominated pensions with inflations hedges right NOW or they will be completely screwed.  (copper, nickel, silver, gold, platinum, palladium, rhodium.....I don't really care....and keep it in small denominations so you can liquidate without IRS attention.)

Bicycle Repairman's picture

We had inflation in the 1970s and what happened with SS?  Nixon secured the elderly vote by putting in an inflation adjustment that made recipients come out better than wage earners.  So there is some history on the topic of inflation and SS. 

America's economy is very much a political animal, and not as much an economic one.  Politics rule.  The elderly have all day to argue and they vote as one.

Anyone catch Paul Ryan's speech at the AARP convention?  It was a fiasco.  It seems only Paul Ryan and this country's handful of libertarians don't understand how it works.  Ryan actually has a prayer of obtaining office.  He'll need to smarten up, though.

This is a very rich country.  Don't underestimate the ability for the necessary resources (currently "hidden") to show up when they're needed.

dmger14's picture

True.  The one silver lining in all this is is the older generations have to share in the pain they created by living far beyond their means and setting up the ponzi scheme if only because they elected politicians who did it.  I'm sure many thought they'd die before it collapsed aNd thN future generations would have to suffer the mess. I guess they're not so lucky. Nominal payments will be made and inflation will inflict the pain.

Ckierst1's picture

Actually, the one silver lining in all this is, ummm, silver, preferably in bullion coins.

ronaldawg's picture

Gee that's quote a moral hazard that they have set-up isn't it.   I think it is time that we all take it upon ourselves and act just like the greedy banksters.  Go steal everything that is not nailed down.  Lie, cheat and steal just like the government does.  Answer questions like Bill Clinton, have sex with everything that moves, etc. 

World is going to end in couple of months anyways, right?

sink critically's picture

Knowing that social security was a scam from the get go, I used to plan to work the open shift at a fast food place in my old age. Since waking up the rest of the way I now know that there won't be a job for me there either. Needless to say I am much nicer to my children these days.

blindman's picture
24 September 2012
Gold Daily and Silver Weekly Charts - End of Quarter
frank sinatra. "summer wind"
Tom Waits - Frank's Wild Years
you see? it all makes perfect sense, no?
like tying a shoe lace, once learned, that is it.
of course those that do not have the time or
interest or humour for this kind of thing i say
good for you, you are likely in a better place,
wherever that might be.

Translator's picture

It's OK, Obama is BLACK!!!!!! and he's a great public speaker! and er uh good at reading off a teleprompter.......

blindman's picture

22 September 2012
Audacious Oligarchy: The Double Flash Crash In Gold - Sept 13, 2012
wow, in broad daylight.

SmittyinLA's picture

Bottom line, not only was FNM not killed, every American worker is forced to finance it with their retirement.