Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24
How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - 17th Feb 24
Why Rising Shipping Costs Won't Cause Inflation - 17th Feb 24
Intensive 6 Week Stock Market Elliott Wave Training Course - 17th Feb 24
INFLATION and the Stock Market Trend - 17th Feb 24
GameStop (GME): 88% Shellacking Yet No Lesson Learned - 17th Feb 24
Nick Millican Explains Real Estate Investment in a Changing World - 17th Feb 24
US Stock Market Addicted to Deficit Spending - 7th Feb 24
Stocks Bull Market Commands It All For Now - 7th Feb 24
Financial Markets Narrative Nonsense - 7th Feb 24
Gold Price Long-Term Outlook Could Not Look Better - 7th Feb 24
Stock Market QE4EVER - 7th Feb 24
Learn How to Accumulate and Distribute (Trim) Stock Positions to Maximise Profits - Investing 101 - 5th Feb 24
US Exponential Budget Deficit - 5th Feb 24
Gold Tipping Points That Investors Shouldn’t Miss - 5th Feb 24
Banking Crisis Quietly Brewing - 5th Feb 24
Stock Market Major Market lows by Calendar Month - 4th Feb 24
Gold Price’s Rally is Normal, but Is It Really Bullish? - 4th Feb 24
More Problems in US Regional Banking System: Where There's Fire There's Smoke - 4th Feb 24
New Hints of US Election Year Market Interventions & Turmoil - 4th Feb 24
Watch Consumer Spending to Know When the Fed Will Cut Interest Rates - 4th Feb 24
STOCK MARKET DISCOUNTING EVENTS BIG PICTURE - 31st Jan 24
Blue Skies Ahead As Stock Market Is Expected To Continue Much Higher - 31st Jan 24
What the Stock Market "Fear Index" VIX May Be Signaling - 31st Jan 24
Stock Market Trend Forecast Review - 31st Jan 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Politicians Say Social Security Is Sustainable, but Numbers Show Otherwise

Politics / Social Issues Apr 11, 2017 - 12:29 PM GMT

By: John_Mauldin

Politics

We may be the envy of the world in some ways, but the US also has no shortage of stress. Today, we’ll look at some data on growing financial anxiety that is plaguing an increasingly large part of the nation.

Last week, I ran across a survey from NerdWallet on this very issue. They asked 2,000 Americans of all ages about their biggest financial concerns. It turns out the biggest worries are healthcare expenses, lack of emergency savings, and lack of retirement savings.


Yet only 28% worry they lack retirement savings? Compare this with what we know about people’s actual savings, and that number is far too low.

33% of Americans have no retirement savings at all; another 23% have less than $10,000; and a further 10% have less than $50,000. So that’s 66%, a full two-thirds of Americans, with either no savings at all or not enough to generate significant income.

(If you have $50,000 and can pull out 4% a year without drawing down principal—which is hard to do—you’ll get something like $160 a month.)

This shortfall is a problem, and not just for them.

You Think Social Security and Medicare Will Cover Them?

It’s easy for those of us in the Protected Class to think the masses will be fine. They at least get Social Security and Medicare—enough to keep them out of poverty, right?

No, not right.

You may remember us mentioning this before, but the Social Security Administration publishes a very handy annual “Fact Sheet” that paints a different picture.

In 2017, the average monthly retiree benefit is $1,360, which translates to being a full-time worker who earns $7.85 an hour (and remember, this is the average; many people receive less).

Social Security’s fact sheet also says benefits represent about 34% of the elderly population’s income—but that number is heavily skewed in favor of the wealthy. Among retirees, 21% of married couples and 43% of unmarried persons rely on Social Security for 90% or more of their income.

Currently, 41.2 million retired workers and 3 million dependents receive Social Security benefits. So that means 15 million or more retirees must be living on an income that’s meager by any definition.

But at least they don’t have to worry about medical bills, you say; Medicare covers them all. Well, yes, it does cover them, but that’s not the same as covering their expenses. Copays and deductibles add up quickly unless you have supplemental insurance, which itself is expensive.

Medicare recipients are responsible for 20% of hospital bills, and for these people, even a short stay can wipe out months of income.

The Social Security fact sheet has another chilling number. It says 51% of the private workforce has no private pension coverage. Those are presumably people who work in small businesses or are self-employed or “gig” workers.

So Is Social Security Sustainable?

To listen to politicians, Social Security obligations will always be met. But as I’ve been writing about for years, the numbers tell the reality may be different.

By 2035, the number of Americans 65 and older will climb from about 48 million today to over 79 million. That’s the Baby Boomer impact.

Currently, there are 2.8 active workers for each Social Security beneficiary. It will be only 2.2 workers per beneficiary by 2035. And just to throw a little more fuel onto your worry fire, that figure of 2.2 workers per beneficiary assumes that labor force participation rates between now and 2035 will be stable or improved from where we are today.

But the chart from Larry Summers last week showed that there are now 10 million men in America between 24 and 54 who are not in the labor force.

That number could rise to as high as 20% of the labor force by 2035. Take out another 10% of the labor force, and now there are fewer than two workers per Social Security beneficiary.

That means each and every worker, from the lowest paid to the highest, must pick up the tab for roughly $7,000 per year of Social Security expenses through their contributions and taxes—before they start to pay for any other government services like healthcare or defense (not to mention interest on the national debt).

John Lennon’s song lyric comes to mind: “You say you want a revolution?”

Get a Bird’s-Eye View of the Economy with John Mauldin’s Thoughts from the Frontline

This wildly popular newsletter by celebrated economic commentator, John Mauldin, is a must-read for informed investors who want to go beyond the mainstream media hype and find out about the trends and traps to watch out for. Join hundreds of thousands of fans worldwide, as John uncovers macroeconomic truths in Thoughts from the Frontline. Get it free in your inbox every Monday.

John Mauldin Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in