Social Security a new look
I wanted to frame the Social Security Discussion slightly differently. The government web site has lots of interesting material.
I started with this: http://www.socialsecurity.gov/cgi-bin/netcomp.cgi?year=2013
This is all of the income data for 2013. I took every income range in this report and I calculated their Social Security Benefit and their interest adjusted contributions as though they worked for 35 years at that Average Wage Growth (AWG) adjusted salary. I used the intermediate long term COL, AWG, and interest rates used in the SS trusties report for 2013. I then asked did the contribution of everybody in this universe provide enough dollars to cover 1/35th of their long term benefit. Additionally I assumed that the average life expectancy at full retirement age 66 was 19 years. The current documentation from the CDC lists (2009) that the average life expectancy at 65 is 19.2 years so this is a conservative estimate. The most popular age to sign up for benefits according to material on the SS gov web site is 62 and the 23 years of benefits for that group of people is 13% less than the benefits for 19 years of the person that signs up at 66. So I modeled 25% of the population signing up at 62 and 75% signing up at 66. The contributions to SS 10.6% adjusted of our salaries adjusted for interest covered the entire cost of the accrued benefit plus 78 Billion was left over. There are currently about 33 Billion or 7% of other expenses in SS above the direct benefit (spousal coverage, dependent coverage, administration expenses, etc.) So for the year we provided sufficient funding to accrue all of our SS liability plus we provided 45 Billion extra into the system. The system receives extra funding besides this in that most people need to work until they sign up which means they work for 40 years or more. If everybody works one extra year that provides an extra 710 Billion into the system. This means that all workers are fully funding their future Social Security benefits. This has only been the case since about 1983 and those payments have also funded some of the current retirees who collected benefits that they did not fully prefund. We are earning and paying for our benefits. The only question now is what is the shortfall in the trust fund due to current wage earners paying for their own benefits plus carrying previous beneficiaries before the laws were changed to increase contributions and retirement age. Why is this not a solvency question answered in the trustee report? It would not fit the narrative that our benefits which we are fully funding need to be reduced.
