May 23, 2011 10:38 PM   Subscribe

Listening to NPR I heard them saying, a little too casually, that "Generation Y is preparing for a future without any Social Security benefits". REALLY?? I did _NOT_ get that memo.

In Sunday's "The Economy Is Truly Going To Hell, but here is what YOU can do about it" radio show, the spokesheads suggested that "Generation Y is preparing for a future without any Social Security benefits"... ... ...

Did I miss something? So, the collapse and implosion and privatized plundering of Social Security is now a foregone conclusion, and the kids who are Paying In today are expecting to Not Get a Payout at the end?!?

Someone tell me this isn't happening!! I mean, we just survived the Second Coming and the Rapture --- --- --- but now, this??
posted by shipbreaker to Work & Money (36 answers total) 19 users marked this as a favorite

This isn't really a new issue. I remember first hearing about how the boomers would destroy Social Security during the Reagan years. I also always thought of SS as a giant Ponzi scam, that we are all forced to pay into. And always thought the final fix would end up being raising the retirement age and means testing.

Looks like I'm not wrong.
posted by Marky at 10:48 PM on May 23, 2011 [2 favorites]

I don't know a single person under 35 who thinks they'll get SS benefits like their grandparents.
posted by 0xFCAF at 10:50 PM on May 23, 2011 [28 favorites]

Oh for god's sake. There are a lot of problems with Social Security, but it is not a Ponzi scheme. Why? Because in a Ponzi scheme, you pay early "investors" with the money you get from later "investors" and eventually you run out of people to bring into the system. In the case of Social Security, 1) Old people eventually die and 2) New people get born and immigrate into the US all the damn time.

Yes, it's very possible that demographic shifts will result in lower Social Security payments to the currently-young generations than their grandparents got. And a prudent person will save with the assumption that they can't count on a lot of government help, in the same way that counting on a private-sector pension has proven to be very ill-advised.

Nevertheless, Social Security is not a Ponzi scheme and it is misleading to call it such - to the point of being flat-out wrong. The flaws with Social Security have nothing to do with fraud, and the mechanism that causes Ponzis to collapse (running out of 'fresh meat') is entirely impossible.
posted by Tomorrowful at 10:56 PM on May 23, 2011 [52 favorites]

The Social Security is a Ponzi Scheme is the BIG LIE of the New Deal Haters. The program was always intended to pay current retirees from moneys paid in by current workers. My father retired when I was 30, so I spent a couple decades helping to pay for him. If the future workers don't want to pay what is needed, the future retired are screwed. 20% more? Not that big a figure, a lot of that can be covered by raising the earnings ceiling and getting more out of the filthy rich. But some people believe Social Security has to be a regressive and not a progressive tax. Class Warfare 101.
posted by oneswellfoop at 10:59 PM on May 23, 2011 [16 favorites]

...the kids who are Paying In today are expecting to Not Get a Payout at the end?!?
Yeah, that was a foregone conclusion when I was in college in the '90s.

That bullshit line has been going around ever since I was in college in the '70s.

Just don't rely on your investments to pay for your retirement. The days of 5-10% annual returns are over. Unless you're already a billionaire.
posted by oneswellfoop at 11:03 PM on May 23, 2011 [6 favorites]

Just because the mythical Generation Y is preparing to do without SS doesn't mean that they're right, you know.
posted by maudlin at 11:11 PM on May 23, 2011 [5 favorites]

Social Security only works in an expanding economy; I don't see how you can make it work — pay current retirees using monies paid in by current workers, who get paid out later with interest — in a contracting economy. In that sense, it is definitely Ponzi-esque. Not in the sense of being fraud, but in the sense of only working under one set of conditions which are not guaranteed to always be the case.

A good example is to try to imagine how the classical, everybody-wins vision of Social Security would work in an environment like Japan right now, where you have a contracting workforce, declining population, very low immigration, contracting real GDP, etc. It doesn't work; you end up having to extract an increasing amount out of each generation of workers (in real terms) when they're young in order to pay their parents' generation what they're owed. In that case you might as well get rid of the PAYGO trappings and just call it a tax, and not give anyone the expectation that they're owed as much as they paid in.

I think discussions about Social Security in the US are often marred by differences in opinion over what sort of time scale we should plan for. It's quite plain to me that growth economics can't just go on forever, but I suppose they probably could be kept going — via immigration and various policy measures — for the rest of my lifetime. So from a purely self-interested perspective there might not be a problem. But eventually, within a few centuries at least looking at general worldwide population trends, someone is going to get left holding the bag, or the system is going to have to get changed to remove the get-out-what-you-put-in expectation. So whether or not it is "broken" depends on your planning horizon.

My guess is that we'll probably eventually see means testing, which would essentially make it so that some people (the ones who exceed the means-testing level) won't get out what they paid in. That would remove the Ponzi-like investment scheme aspect and turn it into a more straightforward tax, which would be sustainable — if perhaps not politically palatable — even under declining-real-GDP and declining-population conditions.

But anyway, to answer your question, I know of a lot of people who treat it like a tax and don't factor SS into their retirement plans, because that's the conservative (in the financial, not political sense) thing to do. Nobody can say when the government will find the motivation to fix the system to make it long-run sustainable, and what might change in that event. Since it's impossible to know what side of the means-testing cutoff you might find yourself on, if you have concrete goals for your retirement (buy this house, do this thing) then it makes sense not to plan on getting anything, and treating anything you do get as a windfall.
posted by Kadin2048 at 11:29 PM on May 23, 2011 [5 favorites]

Social Security will be there and it will be fine. It will only break if we break it. The people who are saying that is will be gone are setting it up so they can get rid of it. I have been hearing about it "breaking" since I was a kid. I am 53.
posted by fifilaru at 11:41 PM on May 23, 2011 [4 favorites]

Well, to put it in this simplest terms: it's a problem.
Around 2017, payroll tax revenue is projected to be insufficient to cover Social Security benefits and the system will begin to withdraw money from the Social Security Trust Fund. [Source]
Realistically, you don't know what's going to happen and have little control over it. You (and millions of other Americans) are best advised to plan for retirement as if Social Security will not be there. It probably will be in some form, but it may be means tested or benefit reduced, and you really cannot guess the parameters. Since planning to live on Social Security is a plan that barely puts you above poverty, Social Security should not form the basis of your retirement planning even in the best case scenario. Ignore it and plan accordingly for your retirement now.
posted by DarlingBri at 11:55 PM on May 23, 2011 [2 favorites]

Last I heard, there was another baby boom, starting ten years ago. So by the time you retire, there should be a large workforce supporting a small retiree proportion.
Which is perfect.
It's the baby boom retirees that will hit trouble, because a smaller workforce will struggle to support them to the degree they were able to support retirees when the boomers were the workforce.

You are not a baby boomer.

The risk is not that the booming soon-to-be workforce can't support your feeble numbers when you retire, it's that the current problem (your feeble numbers no supporting the current retirees) will be used politically as an excuse to dismantle the system.

Judging by current political and economic insanity in this country, it's a real risk.
posted by -harlequin- at 12:00 AM on May 24, 2011 [3 favorites]

Social Security has potential short-fall that might happen in 2040 or so. This "crisis" in Social Security is manufactured for one reason only: to privatize it and make the profits available to the few instead of the many. (See also: Enron and energy deregulation, or relaxing banking rules and the subsequent adventure with mortgage-backed securities.)

NPR is indulging themselves in a little generational bickering to please their many conservative sponsors/guests.

I'd worry about crises that are more urgent, like the unix epoch problem or why hot dog buns come 12 to a package when hot dogs only come in 8 to a package.
posted by fifteen schnitzengruben is my limit at 12:03 AM on May 24, 2011 [13 favorites]

Social security needs to be tweaked, but it is definitely not a Ponzi scheme. That's just a GOP talking point.

And even FDR didn't expect people to rely on it solely for retirement. You need to save, but SS is a supplement to guarantee that at least you won't starve to death.

See, people used to literally starve to death in the streets of pre-New Deal America. And Republicans are desperate to return us to the "good ol' days" before America had a viable middle class.

Don't listen to them.
posted by bardic at 12:34 AM on May 24, 2011 [7 favorites]

In Australia, at least, it's been a foregone conclusion that today's workers aren't going to be able to live on the pension for some time. As a result, compulsory superannuation came into effect in the late 90s. This is money, a minimum of 7% of your salary, paid by your employer, into a retirement fund, which cannot be accessed under most circumstances until you are 60.

On the bright side, it means I don't need to have any self discipline beyond getting and keeping a job to fund my retirement. On the downside, there is something irritating about being taxed both on the deposit and the withdrawal of this money, which I cannot really do anything with for several decades. Oh, and my day to day pay is effectively lowered.
posted by ysabet at 1:47 AM on May 24, 2011

Here is a thing: the state is a giant machine for moving money around (among other things). There's always a war over who gets the money - is it distributed up, from the working and middle classes to corporate contractors, rich people via tax breaks, investment banks? Is it distributed down/outward to everyone through widespread tax breaks, benefits, medicare, medicaid, unemployment, social security etc? Is it distributed to consolidate progressive political bases (unions, working people, people of color, women) through having a social safety net? Is it distributed to consolidate conservative aims through military spending (which does create jobs but only if we have wars/military development/selling arms) and privatization (profits for big corporations! terrible jobs!) How much accountability will be put on the people who receive the money? (Clue - welfare receipients, a lot! NIH grant recipients, some! Corporations, very little!)

The US is, even now, a very rich country. The current financial crisis is real, but the policy wars are basically wars about "how will the state be used to collect and distribute money"? Neither conservatives nor liberals want to stop using the state to distribute money; they just want to change who the money goes to and how it is accounted for. To me, this is the most important thing to understand about what the state is for. The question is, will we spend most of our money on wars and tax breaks, or will we spend most of it on social safety net/social investment?

Predictably, people who have lots of investments want to push all that social security money into the stock market, because if a lot of new money goes into the stock market then the prices of their current stocks will rise. (Among other related reasons)

Chile has tried a two-tiered retirement model - state pensions for the army, investments for almost everyone else - and it's been a disaster for working people. We have this data. And note that the army - a literally dangerous social force - gets to keep real pensions because the state needs to keep control of the army by bribing it with real benefits. That shows that the state knows that investment-funded mass retirement is going to anger and screw over most people.

So anyway, as several people have said, Social Security will go down if there is no political will to sustain it. If, for example, we taxed all of everyone's earnings (instead of stopping at the first $200,000) there would be no Social Security crisis. I assume we could also raise contributions - which would be my preferred solution over raising the retirement age, because while a white collar professional can happily work until 70, it's a lot harder for blue collar workers to do physically gruelling work even to 65.

It makes me laugh when everyone is like "don't count on social security! be conservative!" Lots of people in this country are goddamn poor, regular working class people living paycheck to paycheck--my neighborhood is full of them. Social security is what they count on.

Look, if folks want a poor working class but don't want old people starving in the streets, we have to have good social security because we're exploiting people to the point where it's really hard for a lot of them to save meaningfully for retirement.
posted by Frowner at 2:48 AM on May 24, 2011 [24 favorites]

Oh god, look people. There is an incredible amount of fear mongering going on about social security. Why? Because people want to get rid of it. Privatize it. Whatever. Republican politicians are constantly saying it's DOOMED but the reality is... not so much.

Basically, back in the 80s it became clear that Social Security wouldn't be able to pay all the baby boomers when they retired, so they created the social security trust fund. People would pay in a little more, that would go into the trust fund, and then that money would be used to pay benefits when baby boomers retired.

Now, baby boomers are starting to retire and money is starting to come out of the trust fund, as planned.

except republicans are screaming about how social security is going bankrupt because it's about to start paying out more then it takes in. Totally ignoring the fact that, this is exactly what was planned and the fund has trillions of dollars in it (something like $2.5t according to the wikipedia article)


Now there is one other issue, which is that there is a slight actuarial imbalance that will kick in like, I dunno 2050 or something in which case the trust fund will be empty.

However, there is no reason why social security cant run it's own "deficit" and just keep paying out more then it takes in forever. It's just a government spending program like any other. As long as the law says people will get paid, people will get paid. You could also just tax people slightly more.

So rather then financial risk, there's a political risk. If the republicans can convince people there is a crisis, and that bold action needs to be taken, then they'll have the cover they need to gut it, which is what they want.
posted by delmoi at 3:28 AM on May 24, 2011 [16 favorites]

Also, if you really want you could read the social security trustees report

Oh, and Here's a krugman article I just found that goes over some of this stuff.
posted by delmoi at 3:31 AM on May 24, 2011 [1 favorite]

If you're Generation Y, you can count on experiencing a series of immense shocks to the economies of the world as we start to run out of and degrade a wide range of natural resources - easily recoverable oil, natural gas, phosporus, high-quality coal, fish stocks etc etc. Then there's climate change.

Basically, nobody knows what the economies of the developed world will look like in 40 years' time. Will we adapt with renewable energy and sustainable farming? Will we discover new sources of energy? Will we starve (literally) as unfertilised soil worked by manual labour and animals turns out to be far less productive than soil farmed with modern, petrochemical-based agriculture? Will the world order collapse into a giant neverending party of resource wars? On current signs, not looking good.

Basically, don't count on anything. I have the Australian superannuation that ysabet mentions and I'll be extremely surprised (but happy) if it's worth anything when I "retire" in 35 years.
posted by A Thousand Baited Hooks at 3:43 AM on May 24, 2011

There are a number of factual errors in Ysabet's comment, but I don't believe that me questioning them here would be on-topic, as these are about the details of the Australian system, not the US's Social Security system - which is quite different.

Ysabet: I work in the field, and don't mean to be rude. You're right in general, but a number of the specifics of your comment are in error. If you'd like to discuss this further I'd be happy to take it up in memail.
posted by pompomtom at 4:03 AM on May 24, 2011

the spokesheads suggested that "Generation Y is preparing for a future without any Social Security benefits"

The more you repeat the lie, the more it sounds like the truth.
posted by Civil_Disobedient at 4:21 AM on May 24, 2011

Response by poster: Social Security will go down if there is no political will to sustain it

Whoever it is "at the top" beating the drum of "Social Security gonna collapse! Privatize it, Privatize it!!" --- --- is it Cassandra, Chicken Little, or mostly someones trying to get their hands on the money?

A bit of each? Mostly the latter??

=== ===

By the way, I just tried to Google "Cassandra" and Ajax Auto-complete auto-filled my page up with "Cassandra Clare" 2-million-results instead of the real Cassandra 40-million-results I was looking for. Jerks.
posted by shipbreaker at 4:38 AM on May 24, 2011

I think I'm more likely than not to get social security benefits. I'm not counting on it or planning to get by just based on that, though.

(Isn't this pretty chatfiltery, btw?)
posted by J. Wilson at 4:47 AM on May 24, 2011

Response by poster: Can these issues be separated; PUBLIC PERCEPTION of whether the SS will implode, versus FACTUAL REALITY of whether SS will implode, and how one drives and steers the other, and how media stories just like the one I heard, and Metafilter posts just like this one, deliberately try to either push over the system and knock it down, or prop it back up. It's an issue more "Meta" than most people realize, and it's very important for smart people to discuss.
posted by shipbreaker at 4:59 AM on May 24, 2011

The chat is interesting...but I think the answer to your actual question (Is most of generation Y really preparing for a future without social security benefits, and if so, should I?) is really not as much as they should and yes, regardless of what's driving the NPR Cassandra/Chicken Little talk.

For the purposes of your advance planning, it does't really matter whether social security is really about to implode or if the implosion talk is all driven by self-interested people who want to privatise the system. You shouldn't gamble on your own old age by acting on the assumptions that those who believe in a coming crisis are wrong and that those who are trying to precipitate a crisis will fail.

You, as a member of generation Y, should plan for retirement under the assumption that there will be no social security at all available to you when you retire - that's the (financially) conservative assumption to make. Then keep up with the news to see how it all actually works out.
posted by Wylla at 5:17 AM on May 24, 2011 [1 favorite]

Then keep up with the news to see how it all actually works out.

Or alternatively, you know, take some political action to try to gain your ends. The government isn't the weather; given how horrible and corrupt things are right now, it's difficult to organize, but other countries have come back from worse. There's no need to talk as though the forces of government should just battle this out free of citizen involvement.
posted by Frowner at 5:22 AM on May 24, 2011 [4 favorites]

You are right, I think, that that old saw "generation $[variable] doesn't even expect to get social security" is the same branch of the Col. McCormick "it's a ponzi scheme" lie.

Most people don't think about their retirement. That's why Social Security is necessary.

The thing to worry about is that the "trust fund" is really just a shitload of treasury bonds, which is the current boogeyman of current politics. When Social Security stops running a surplus and needs to start pulling its savings, the Treasury will need to pay them back. Meaning double borrowing or higher taxes or reduced services.

$2.6 Trillion of the US debt consists of these securities.

The good news: social security isn't broken. The actuarial blip where social security "goes broke" really is just a blip. All it takes to fix it is a minor tweak in taxation rates or benefit payout. "Going broke" simply means there is a point in the future where it will have exhausted its savings and will need to pay out more than it is taking in. It DOES NOT mean that everyone will stop getting checks. It just means the budget will go negative. I don't know the numbers, but on a percentage basis, they just can't be that big. So, if it is 1% deficient that year, then cut benefits by 1% and the problem is solved.

The bad news is that in order to even get to that point, the US government will need to really, really get its spending in order. Or, figure out a way to increase prosperity so that we can grow our way out of the situation. Which, if done right, will be good for everyone.
posted by gjc at 5:59 AM on May 24, 2011

Mod note: Some comments removed. It's fine to want to get an understanding of the long-term dynamics of SS but this needs to not just turn into an argument or a chat session.
posted by cortex (staff) at 6:59 AM on May 24, 2011

There's no need to talk as though the forces of government should just battle this out free of citizen involvement.

True enough, and the bit about watching the news was really not intended seriously...but my overall point remains. Regardless of what you do - organise like hell, hide under the bed, or just passively watch the news - you should plan for your own future on the worst-case assumption. In this case, that means assuming that organisation will fail,t he system will either implode or be destroyed, and Generation Y will have no Social Security to fall back on.
posted by Wylla at 7:11 AM on May 24, 2011

Future facts will always be difficult to determine. The amount of money available in the system is dependent on the amount of money taken out. If the current oldsters live longer than average they will be taking out lots of money. I'm on the tail end of the boomer generation and will be retiring in 20 years. It would be nice to get SS funds then but I am not banking on it.

The funny thing is the current crackdown on foreign workers, illegal and otherwise, hurts the system. People who would be paying into the system and would not be collecting continues to drop because of these "reforms".
posted by JJ86 at 7:25 AM on May 24, 2011

The corporatist Republican Party would like you to think that because it makes it easier to dismantle SS if everyone assumes it is bound to go away. Unfortunately, many Democrats and independents have bought the line.
posted by General Tonic at 7:29 AM on May 24, 2011

I've heard that the sky is falling re: SS for a while. I've also heard that illegal immigrants pay into the system but don't receive benefits so it's actually in good shape. Realistically the age when you can start receiving benefits will likely increase. It's super unpopular but the fact is that people are living longer than they were when SS started.

Anyway, I've concluded that it's better to be safe than sorry and save what I can for retirement. If SS is still around and can give me some spending money when I'm in my 70s, that's super but I'm not holding my breath.
posted by kat518 at 7:37 AM on May 24, 2011

I have the joy of being both in the generation that gets to wait to age 67 for full benefits, and reach that date on the year currently projected to be the one where the shortfall begins.

It has been clear to me for some time that this is a political and not financial "problem". Whether I'll get full benefits will be entirely a political decision. Personally, I've certainly not made the assumption that Social Security won't/can't be there. I'd be all for a small estate tax component to recover the funds from the current wealthy retirees who pass on not having needed all their wealth to survive covering the system for the next generation. Every time I hear a plan to revise a retirement program, but not for those currently over 50, my desire to see this sort of system increases. If a fix is needed, apply it to everyone. If it isn't affordable to seniors now, how will it be in the future when even fewer have pensions or any kind of reasonable retirement from their employment?
posted by meinvt at 9:23 AM on May 24, 2011

I've also heard that illegal immigrants pay into the system but don't receive benefits so it's actually in good shape.

Its not only the illegal immigrants - all the folks that are not US citizens, but still working (legal foreign workers) here who pay Social Security taxes (?). They don't receive any SS benefits, even though they may stay here for 10 years. Even 1 year of SS payments via payroll per person is huge, considering that there were 1.1 million people with temporary employment eligibility in 2009 (CRS Report link)
posted by theobserver at 9:58 AM on May 24, 2011

Mod note: folks, while question is sort of fighty, you don't need to be. Answer the question, keep the grar to yourself and move on please. Thank you.
posted by jessamyn (staff) at 10:38 AM on May 24, 2011

Two things you can do to help your retirement, regardless of whether or not social security will provide sufficient funds to support you when you're older:

1. Settle into a community with a reasonable cost of living, and which you can get around without owning and operating a car. Keeping day-to-day costs low for things like getting to the grocery store and the doctor will go a long way towards giving you a sustainable lifestyle, and if you settle in now you'll be surrounded by friends who grow old with you.

2. Aim to own a paid-off house by the time you turn 60, or if possible, a paid-off income property. Obviously this one is harder, but if you insist on living somewhere with an unreasonable cost of living, presumably you're making the money to justify it -- so at least put some of it away in hopes that when you're getting close to 60 you can buy a house or income property in a more reasonable area, outright.
posted by davejay at 3:21 PM on May 24, 2011

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