Social Security Growth
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"If Social Security were a private retirement fund, we’d sue."
One of the worst performing pension funds in the world last year was yours.
And you probably didn’t even know it.
All that money you’ve poured into the Social Security trust fund over the years earned less than 1% during 2020, the funds’ administrators have revealed.
The S&P 500 index SPX, +0.60% ? Try 18%.
Even a simple balanced fund of U.S. stocks and bonds, such as the Vanguard Balanced Index Fund VBIAX, +0.47%, earned 16%.
And the giant pension and investment fund run by the government of Norway earned 10.9%.
The returns earned by Social Security is the scandal that keeps on taking. The previous year, the Norwegian pension fund gained 20%, the balanced index fund 22%, and the S&P 500 31%.
Your and my Social Security dollars? Just 2.2%.
No, I’m not kidding. So far in 2021 the fund’s returns have been less than the rate of inflation.
There is an explanation for this fiasco. Social Security is expressly forbidden by law from investing any of your dollars in the kind of assets that are recommended by every competent financial adviser on the planet and which are trusted by every other pension fund.
Ownership of stocks? Zero percent.
Ownership of real estate? Zero percent.
Ownership of commodities? Zero percent.
The only thing it can own: U.S. Treasury bonds.
Imagine a company pension fund investing all its money in that company’s bonds and you get the picture.
This is an explanation of the terrible returns. But it is not a reason for them, only a rationalization. Social Security’s requirement to invest only in Treasury bonds was set when it was created back in the 1930s, during the bygone era of ticker tapes and MovieTone newsreels.
This sounds academic, but it isn’t. Social Security is in a deep financial crisis. At the current rate, they might have to cut all benefits by 25%, starting in just 10 years’ time, just to balance the books. Or they’ll have to raise your payroll taxes, and cut your benefits less. Or they’ll have to raise payroll taxes a lot. None of this would be necessary if Social Security had owned stocks as well as U.S. Treasury bonds recent decades. None of it. We’d all be living large.
Something to remember next time some politician talks about “unsustainable entitlement spending,” which is another way of saying you’re about to get hosed.
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@jon-nyc said in Social Security Growth:
Careful what you wish for. Do you really want the SSA to own trillions of dollars of stocks?
I really don't know enough about it. As you know, my knowledge of large-scale finance is limited, if existent at all, LOL.
However, in the article, in the parts I didn't quote, the author comments about other countries, like Norway, which do have a measure of investment in stocks. They appear to be doing much better.
Warren? If the crunch comes, as the author claims, in 10 years, what is your guess on what the government is going to do? If they cut bennies by 25%, it'll be tar, feathers, and pitchforks on the Capitol steps. Perhaps by that time, the Q'Anon Shaman will be out of jail to help.
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I still support the Bush era idea that a portion could be put into a fund of your preference.
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George - No doubt they’d get better returns my fear is the government would use what would become very large positions in major corporations as additional leverage over them to implement their social and economic policies. What’s worse is the leverage would be administrative in nature so not subject to legislative veto points.
This happens today with state pension funds but the scale of influence would be altogether different.
Norway, Saudi Arabia and a number of gulf states have sovereign wealth funds but they don’t really have the influence in US markets of the kind I fear.
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@lufins-dad It's just the administration of it that becomes complex. Which is probably a lot more solvable these days with software systems.
I'd think the vast majority of those actively plan for retirement would want this.
It does create a new vector of inequality - because people who aren't educated on these things will miss out on gains. But them be the breaks.
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@xenon said in Social Security Growth:
@lufins-dad It's just the administration of it that becomes complex. Which is probably a lot more solvable these days with software systems.
I'd think the vast majority of those actively plan for retirement would want this.
It does create a new vector of inequality - because people who aren't educated on these things will miss out on gains. But them be the breaks.
I would keep the options very limited. An extremely stable fund, a moderate risk fund, and a moderately high risk fund. The fund managers would be an outside firm, contracts running every 24 month with renewal awards based on past success and costs...
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Much of the problem is that...
- Social Security should never be paid to an illegal alien.
- SSI rules and compliance should be tightened.
- People should be educated at an early age, that Social Security us not, and was never ment to be, a person's entire retirement. It is meant to be a supplement.
Always remember, Operation Valkyrie was an act of sedition.
Warning: I post things that interest me. Read and comment at your own discretion. -
DON’T let them eat cake.
- RFK Jr -
@jon-nyc said in Social Security Growth:
@jolly 1. isn't a problem. you don't get SS without an SSN and you don't get an SSN as an illegal alien.
I'll be the first to admit things change, but in the past it took just a few hours to get a Social Security card in some places down on the border. For one price, you could get a bogus card with a real number you could not collect on. For a higher price, you could get a card that you could collect on.
The procedure for a good number was to use the number of a deceased person who had never collected benefits and who had died.
I don't know if this tactic still works, but it used to...
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@jolly said in Social Security Growth:
The procedure for a good number was to use the number of a deceased person who had never collected benefits and who had died.
Very interesting. Do these people somehow have to not be reported as dead?
I'm guess social security has some sort of pretty defined mechanism to know when to stop paying payments to someone.
If there is a loophole (unreported dead people) - seems like there's some sort of criminal intermediary that makes a market for these.
Do you necessarily have to be an illegal alien to buy on that market?
Not asking you questions directly, Jolly. Just an interesting situation.
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@xenon said in Social Security Growth:
@jolly said in Social Security Growth:
The procedure for a good number was to use the number of a deceased person who had never collected benefits and who had died.
Very interesting. Do these people somehow have to not be reported as dead?
I'm guess social security has some sort of pretty defined mechanism to know when to stop paying payments to someone.
If there is a loophole (unreported dead people) - seems like there's some sort of criminal intermediary that makes a market for these.
Do you necessarily have to be an illegal alien to buy on that market?
Not asking you questions directly, Jolly. Just an interesting situation.
After the last year, you still have hope of basic competency in the Federal Bureaucracy?
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@xenon said in Social Security Growth:
@jolly said in Social Security Growth:
The procedure for a good number was to use the number of a deceased person who had never collected benefits and who had died.
Very interesting. Do these people somehow have to not be reported as dead?
I'm guess social security has some sort of pretty defined mechanism to know when to stop paying payments to someone.
If there is a loophole (unreported dead people) - seems like there's some sort of criminal intermediary that makes a market for these.
Do you necessarily have to be an illegal alien to buy on that market?
Not asking you questions directly, Jolly. Just an interesting situation.
Criminal?
Nah. The cartels would never do anything criminal...
