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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Uncle Remus's picture

If I use Ben's likeness at the range, does that make me a terrarist?

kalum's picture

I love the idea. Going to suggest they add B to the selection of practise targets at  my local  range. A good way totry to release the rage so many of us feel regarding that lunatic

 

Bernanke , May he  someday RIH

JohnKozac's picture

Welcome back ilene. Good article.

 

With the official CPI at 1.7% and real inflation running over 8%, seniors are really feeling the crunch not only on their low yld CDs, but on the other side also ...i.e., buying their essentials like food.

rsnoble's picture

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

Sadly, we will likely never get to find out."

No, sadly yes I will find out im only 43.  Of course on the other hand no I probably won't because of what's coming.

The really sad part are all the people that think they're actually prepared for this.  Ha.  No one is safe if bad gets as bad can get.  Hope that it doesn't but things certainly aren't looking good.

JR's picture

 "No one is safe if bad gets as bad can get," is right. The "bad" is already here, the evidence of the tragedies caused by jobs lost to globalization and of working mothers forced timewise to feed their families on fast food while living on nothing but worry while their spouses look for work or are underemployed:

Life expectancy falling for the poorest Americans (excerpts) |September 23, 2012 | World Socialist version posted by Global Research

According to a study conducted for the professional journal Health Affairs, life expectancy is falling for significant sections of the working class in the United States, and in some cases has reverted to levels not seen in half a century. …

The authors draw particular attention to the actual decline in life expectancy among the poorest sections of the white working class, those with less than a high school education. Life expectancy for women in that subgroup fell from more than 78 years in 1990 to 74 years in 2008. The figure for men also declined, by three years.

Across all racial groups—white, black and Hispanic—the authors wrote: “We found that in 2008 US adult men and women with fewer than twelve years of education had life expectancies not much better than those of all adults in the 1950s and 1960s.” …

Michael Marmot, director of the Institute of Health Equity in London, told the New York Times that the decline in life expectancy for poor white women over the five-year period from 2003 to 2008 brought to mind the seven years of falling life expectancy for Russian men after the collapse of the Soviet Union in 1991.

This comment is all the more striking given that the five years from 2003 to 2008 largely preceded the Wall Street crash of September 2008 and the ensuing plunge of the US and world economy into the deepest slump since the Great Depression of the 1930s. There is no doubt that all the social evils discussed in the Health Affairs report have worsened over the past four years. …

The article notes the dramatic decline of the United States in international rankings of life expectancy, especially for women, from 14th place in 1985 to 41st place in 2010, according to the United Nations. “Among developed countries, American women sank from the middle of the pack in 1970 to last place in 2010, according to the Human Mortality Database,” the Times noted.

http://www.globalresearch.ca/life-expectancy-falling-for-the-poorest-americans/

rsnoble's picture

Oh wait, duh, I forgot about how Iran and potentially WW3 will take care of all this. Ten bux says all the rich elite assholes are using this time to figure out how not to get blown up themselves. This planet is just screwed.

Heyoka Bianco's picture

Or maybe that should be Fassbinder's The Third Generation (1979):

The film follows a group of leftist bourgeois aspiring terrorists who kidnap an industrialist during carnival season unaware of the fact that they have been manipulated by the capitalist and the authorities whose hidden agenda is that terrorism would create demand for security hardware and allow harsher security measures by the government. The actions of the ineffectual cell of underground terrorists are overlaid with a soundtrack filled with newscast, voiceovers, music and gibberish. The political theme of the film aroused controversy.

Heyoka Bianco's picture

All this makes me think I should dust off Fassbinder's Berlin Alexanderplatz and start taking notes.

azzhatter's picture

Fuck You Ben Bernanke

Kobe Beef's picture

End the Fed! It is stealing money from savers to bail out criminal bankers. Hard working citizens will not have a dime (of purchasing power) to retire on, because wanking bankers refuse to take their own losses.

End the Fed! If boomers don't get it yet, when will they?

kito's picture

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....

 

healthy as in 20 percent a year????.........actually ilene, the only way for the system to stay solvent is to....wait....ummm...there is NO way for the system to stay solvent............oh, wait, the system ISNT SOLVENT, because there is NO trust fund!!!!!..................................the ss trust fund is nothing more than a bunch of dusty IOUS from the treasury..... yes that treasury, the one that borrrows 50% more than it brings in to cover its costs........i dont see alot of trust in that fund.......................

RSBriggs's picture

There is no "trust fund", and hasn't been since 1937.  It's all a lie.

JR's picture

As the article says: "Make sure you're sitting down.

"Seriously."

$887,925,790.00

“You read this right. The top 100 retirees, by themselves, will cost Illinois taxpayers nearly one billion dollars.” And thus begins the list of the “Top 100 School Administrators Salaries and Pension – Illionois 2007, salary and est. total pension:

Mary M Curley ($385,379) $10,988,880; R. Van Der Bogert ($374,496) $10,305,707; Dennis G. Kelly ($356,621) $10,739,636; Neil C Codell ($343,345) $26,661,604; Howard Bultinck ($342,184) $11,798,041… that’s millions and millions and millions, on and on …

Son of Loki's picture

I read GM union workers got a wage incrase and now Chicago teachers (one of the highest paid in the USA) now get a 17% wage increase. It's odd since most private sector companies I know are either "laying off" (aren't euphemisms sweet) or cutting wages. Someone here posted NYC policemen want 22% increase....and so on.

 

My own place cut 10% and increased everyone's deductibles on health insurance. Better then being fired, eh?

Bawneee Fwank's picture

Fucking shit is just disgusting...Im about done with all these motherfucking teachers, fireman, police...all the citizen rapers.

RSBriggs's picture

Apparently the author missed the Supreme Court ruling that Social Security is a tax, nothing more, (Just like OamaCare is a tax) and benefits paid out by the government are completely voluntary - there is no obligation and no one has a legal claim or expectation to receive benefits.  Nor is there any "trust fund", "lockbox" or anything of the sort - social security receipts go directly into the general fund.  There is no "pool of money" that draws interest, it's simply carried as a separate accounting entry but funds are not segregated.  Surprise - we've all been lied to.

From the Cato Institute:

Many people believe that Social Security is an "earned right." That is, they think that because they have paid Social Security taxes, they are entitled to receive Social Security benefits. The government encourages that belief by referring to Social Security taxes as "contributions," as in the Federal Insurance Contribution Act. However, in the 1960 case of Fleming v. Nestor, the U.S. Supreme Court ruled that workers have no legally binding contractual rights to their Social Security benefits, and that those benefits can be cut or even eliminated at any time.

http://www.cato.org/publications/commentary/is-there-right-social-security

Sorry folks, you've just been screwed.  Not just now, but for the past 40 years.... 

Winston Churchill's picture

With spit and sand as the lubricant.

Enjoy.

RSBriggs's picture

More from that Cato link....

...

The Court's decision was not surprising. In an earlier case, Helvering v. Davis (1937), the Court had ruled that Social Security was a tax, not a contributory insurance program, saying, "The proceeds of both the employee and employer taxes are to be paid into the Treasury like any other internal revenue generally, and are not earmarked in any way."

Ol Man's picture

I have been trying to tell people this for almost ten years...

+1

;)

El Viejo's picture

A few years ago (don't know - may still be true) there was a phone wait message on the SS phone number that spelled this out.

marathonman's picture

They trusted the government with their retirement!  That is really funny.  They trusted those SOB's.  That's what I can't get over.  People know politicians lie and they trusted those self-serving scumbags with 18% of their gross income over a lifetime.  What kind of idiots do that?

Chuck Walla's picture

They trusted the government with their retirement!  That is really funny.  They trusted those SOB's.  That's what I can't get over.  People know politicians lie and they trusted those self-serving scumbags with 18% of their gross income over a lifetime.  What kind of idiots do that?

Democrats who think they are getting over on the "Man" when its the "Man" getting all over them. Buy the vote for few hundreds, steal millions. 

 

FORWARD SOVIET!

RSBriggs's picture

Idiots that don't have any choice in the matter?  I was never asked if I wanted FICA taxes withheld or not.  You must be one of the 47% - one of those that's never worked and never collected a paycheck. Get a job and see for yourself....

disabledvet's picture

Would be a better read if we used the example of Greece which is in fact kaput. I don't feel it is that big a stretch to say "happened there...can happen here." it would be nice if serious people...not that the folks here aren't serious...but I still think are ratings are stuck in the single digits...would actually pose the simple question. That is "are we Greece?" indeed Sixty Minutae with all their billions could do a story on how an otherwise perfectly solvent Western...eh, forget. Let's get drunk and go dueling in Tennesee like in the old days...maybe get one of those great Tennessee poli...I mean LAWYERS to..."explain to the Judge why what I really meant to say was...

Hedgetard55's picture

There is no "trust fund". The system is cash flow negative NOW and relies on Fed.gov borrowing to pay the benefits. Same as it will be 5, 10 or 20 years from now. The numbers they quote mean shit. When the Fed.gov can't borrow enough Ben or his successor will print it. Everyone will get their check, but it may not buy more than a cup of coffee, if we even have a nation by then.

Imminent Crucible's picture

Oh, don't be ridiculous. Of course there's a SS Trust Fund. It's in a couple of file cabinets in a federal office in Parkersburg, West Virginia. Those drawers are stocked full of Special Treasury Instruments backed by the Full Faith and Credit of the United States Gummint. When it's time for you to retire and collect your Social Security check, all the SSA has to do is reach into the drawer, pull out a Non-Marketable Treasury Instrument and give it to Congress: "Here. Cash this in for us. We need to send Hedgetard his first Social Security check for $27,341,012 today".

I don't know what everyone's in such a lather about.

nmewn's picture

This is true.

And isn't it interesting that these IOU's (having such great implied value attached to them) are kept in nothing more, than a filing cabinet. By doing so, the government is acknowledging that without the ability to issue ever increasing amounts of debt to cover the IOU's, the IOU's are completely worthless.

Just follow the money...its vaporized every pay day...into a cloud of IOU's stuffed into a filing cabinet...there is no trust fund if there is no money in it and the government is broke.

bilejones's picture

What we need is a new and deadly form of highly infectious Flue to thin out the geezers.

 

 http://www.cdc.gov/flu/about/qa/1918flupandemic.htm

ATM's picture

Or just have the govt start withholding pills, care, etc under the guise of "cost containment".

It's easy for themt he control the payments because they are going to be able to control our lifespans. 

Offthebeach's picture

Wait until the fully unionized Obama hospital/MERSA death camps get rolling. Grampus gives you any lip about cashing his SSI checks for cigarette, gas and lotto, you just mention 911 emergency. That'll shut'm up real fast.

Landrew's picture

At least the OLD GEEZERS could spell

FLU instead of (flue as in chimney flue).

 

El Viejo's picture

Something else the geezers know that this idiot doen't and that is the 1918 flu killed mostly the young and healthy. The Hanta virus does the same. Infected in the morning and dead by 6:00 pm.

Imminent Crucible's picture

Maybe the Bird Flu will mutate into the BirdBrain Flu, and kill off all the people who never learned how to spell. If that comes to America, most of our demographic problems will disappear overnight.

garcam123's picture

Oh By the way....Fuck you Dude....maybe we needed more rubbers to keep from spawning idiots!

becky quick and her beautiful mouth's picture

don't worry, social security will be just fine. all they have to do is confiscatre your ira, 401k, etc. and roll it in to the program under the guise of calling your new "contributions" retirment bonds or some such nonsense. after all, it is not fair that the tatted up tramp from down the street has nothing but you are sitting on 500k of 401k contributions. the evil rich must pay!

jemlyn's picture

You're right, Becky.  I am drawing down my IRA and paying taxes on it but I have to sell stocks to do that.  It seems to me that if they force these funds into treasury bills it would cause a drop in the DJI.

Freddie's picture

Freedom Bonds.  Anything that has to do with tyranny, which is all govt, they throw the Freedom prefix on it.  Hope & Chains with Dear Mullah.

LawsofPhysics's picture

How about I just keep turning these paper promises into physical assets of real value and all you useless fucks (rich or poor) go rot in hell.

 

A82EBA's picture

hell yes, for each $2300 i can withdraw, after paying the 30% hit.. = 1 oz Au

automato's picture

A friend of mine got divorced about 10 years ago and his ex-wife is now collecting disability from Social Security based on his earnings. He is about to get married again and says his new wife will ALSO qualify for Social Security based on his earnings with not one penny of reduction for any of them. Is this some type of loophole? Can you marry 10 different women and ALL of them collect Social Security based on the higher earnings of the spouse? Sounds like the Welfare scam of all time!

RSBriggs's picture

You have to have been married for a certain period of time, and can collect 1/2 benefits after being divorced for 10 years.

El Viejo's picture

Yet, on the other side: My mother (with 4 kids) was widowed when my father was killed in a car accident. My brother and I were both in the military serving our country. My mother tried to find work, but was forced to go onto SS. She worked fourty years and was forced into 'retirement' at age 81. She worked fourty and my father worked over twenty and also served during WWII at age 17. My mother's SS check= $750 per month.

It's a totally screwed up system.

kalum's picture

Bernanke has already ruined my life. May he RIH

SilverRhino's picture

They really haven't even started fucking retirement up yet.  

The USA has a huge debt issue. Some people are thinking that the government could raid retirement accounts to help fund the government. Some analysis ... There are over 3 trillion dollars in nice liquid 401K accounts suitable for mandatory Treasury holding swaps. Oh and 4 trillion dollars in IRA accounts.

Source: http://www.benefitspro.com/2011/04/18/401k-assets-hit-record-level

Dang, that would be the way to do it. Congress mandates a minimum level of UST's for continued 401K / IRA exemptions. POOF that's anywhere from 1-7 trillion dollars recovered into their hands. [Of course they will squander it]

Or even better, the Fed just provides the UST notes on it's balance sheet for the swaps, and then the Federal Reserve has a huge reduction in balances and looks like a much more viable method for continuing the ponzi.

Of course if Congress went whole hog on this plan ..... Total U.S. retirement assets were $17.5 trillion as of December 31, 2010, up 5.2 percent in the fourth quarter of 2010 and up 9.1 percent for the year. Retirement savings accounted for 37 percent of all household financial assets in the United States at year-end 2010. (http://www.ici.org/pressroom/news/ret_10_q4)

 

 

Landotfree's picture

 ilene 

Has not a clue as to the global credit market system.  SS and the other schemes ride on top of the global credit market system which only exists until the system reaches max potential.  

Your stupid SS system never existed.  Ilene you have no one to blame but yourself.  The Fed and Benny can go against what their job description says, and do nothing, the system would collapse almost instantly.  Either way your stupid SS system which never existed and is only a figment of your imagination will disappear.   

My guess 1-3 billion unfunded liabilities like ilene will have to go, ilene is the worse type of unfunded liability, the one that blames everyone but themselves.... ilene will probably be screaming "I ain't suppose to be here" when the day comes when ilene is liquidated.

"I ain't suppose to be here!" - Freshfish Shawshank Redemption

" and the foolish policies of the Federal Reserve just keep making things even worse"

It has nothing to do with the policies of the Fed, it's idiots like you ilene that want a return ie interest that started this hogwash.  Look even in your stupid article, you are looking for a return.  Sorry, but any system based on the need for exponential growth will die within 100 years most probably within 60-70 years.   There is nothing the Fed can do to save the stupid system.  YOU SHOULD BE BLAMING YOURSELF 
 

JPM Hater001's picture

I tell you what.  Why dont you start lending money to yourself to give to your kids and then call me in 10 years and we will see how that turns out for you.

Stop accelerating your dumbness.

max2205's picture

This old news and Americans don't care.
This is the rock Ben is against and the hard place is every new day