Thursday, July 27, 2017

Social Security's small-portion (one off) Trust Fund

Just had a funny thought.

The general idea anyway of Social Security retirement is for employed workers to support retirees -- who in turn will be supported by current workers when they retire.  That's the general idea anyway.

But for some reason my generation(s) was detailed to save up a small portion of our future retirement needs: paying higher FICA rate than was required to cover current SS outgo -- and when our time to retire came along, cashing in the TF bonds we'd been saving (lending the gov money for normally income tax paid items with our excess FICA tax).

Again, this trust fund was intended to cover only a small portion of our retirement: up to 25% just before the TF bonds finally all run out.

(Actually, not a good idea to let fund all run out -- a truly practical use of the SS TF is to bridge automatically any shortfall in FICA incoming, giving Congress time to patch FICA tax to match SS outgoing.  Happened a couple of times.  TF is legally solvent with one year of full replacement.  Currently has four years.)

Now, if current generations want to do the same "service" for themselves -- wish to save to cover a small portion of their future retirement, rather than rely wholly and completely on current earners -- they will hike their FICA rate enough to (presumably) cover my generation(s)' retirement needs ...

 ... which would leave us back where we came into this movie: each new generation of workers paying for the whole and entire retirement of the older generations -- and expecting follow on generations to do the same for them.  :-O

I don't know what we would be supposed to do with the (ever expanding?) SS Trust Fund. 

I just thought of "what we should do" with the (ever expanding?) SS Trust Fund dreamed up above.  If cash outs of fund bonds to  my gen stop with one year of full replacement remaining (wise), we can roughly calculate that my gen's "savings" would cover about 12% of our retirement for 12 years.  If the next generation saves up the same way -- thereby paying my gen's retirement w/o cashing bonds -- the fund may be able to accumulate more like 24% for 12 years.  Keep rolling this over for five generations (including mine) and in 100 years the SS Trust Fund would be able to cover 60% of one generation's retirement payout for 12 years.

Mmm; or maybe not.  It took longer than 20 years to accumulate my gen's bond pile.  It might take a lot higher FICA tax bleed then my gen took to finance that pile.   

A-L-M-O-S-T  F-O-R-G=E-T
In 100 years people may not be dying except by accident -- leaving the TF totally inconsequential.  :-O

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