You’re Probably Losing Money On Social Security Right Now And It’s Only Going To Get Worse

Most informed people realize that our current Social Security system is unsustainable with the level of debt that we’re racking up. However, did you know that even Americans who are retiring today are: ALREADY receiving less money than they paid into the program?

People retiring today are part of the first generation of workers who have paid more in Social Security taxes during their careers than they will receive in benefits after they retire. It’s a historic shift that will only get worse for future retirees, according to an analysis by The Associated Press.

Previous generations got a much better bargain, mainly because payroll taxes were very low when Social Security was enacted in the 1930s and remained so for decades.

…If you retired in 1960, you could expect to get back seven times more in benefits than you paid in Social Security taxes, and more if you were a low-income worker, as long you made it to age 78 for men and 81 for women.

As recently as 1985, workers at every income level could retire and expect to get more in benefits than they paid in Social Security taxes, though they didn’t do quite as well as their parents and grandparents.

Not anymore.

A married couple retiring last year after both spouses earned average lifetime wages paid about $598,000 in Social Security taxes during their careers. They can expect to collect about $556,000 in benefits, if the man lives to 82 and the woman lives to 85, according to a 2011 study by the Urban Institute, a Washington think tank.

Social Security benefits are progressive; so most low-income workers retiring today still will get slightly more in benefits than they paid in taxes. Most high-income workers started getting less in benefits than they paid in taxes in the 1990s, according to data from the Social Security Administration.

The shift among middle-income workers is happening just as millions of baby boomers are reaching retirement, leaving relatively fewer workers behind to pay into the system. It’s coming at a critical time for Social Security, the federal government’s largest program.

The trustees who oversee Social Security say its funds, which have been built up over the past 30 years with surplus payroll taxes, will run dry in 2033 unless Congress acts. At that point, payroll taxes would provide enough revenue each year to pay about 75 percent of benefits.

Of course, that last sentence is incredibly misleading because no Social Security funds have actually been: “built up.”: The government spent every last dime of that money and then created bonds that have to be paid off out of the general fund. In other words, it’s the equivalent of giving someone $10, having him spend it, and then replacing that money with an IOU and treating that as if it’s the same thing as the cash. An IOU is not the same thing as a trust fund as Americans will one day find out to their dismay when they try to collect.

If you were say, 30 or younger, how would it make you feel to know you’re going to pay money into Social Security for the next 40 years and not only will you not get back what you paid in, the deal is likely to get considerably worse for you over the next decade or two? It’s five miles of bad road and it’s only going to get longer.

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