This is the Truth Network. Um Welcome to Finishing Well, brought to you by CardinalGuide.com with certified financial planner Hans Scheil, best-selling author and financial planner, helping families finish well for over 40 years. On Finishing Well, we'll examine both biblical and practical knowledge to assist families in finishing well, including discussions on managing Social Security, Medicare, IRAID, long-term care, life insurance, investments, and taxes.
Now, let's get started with Finishing Well. Welcome to Finishing Well, a certified financial planner Hans Scheil, and I couldn't be more excited than the show we're going to share with you today. How is Social Security financed and how can we fix it? Which I got to just tell you that was one of the things that I learned early on from Hans. Oh, what a benefit Social Security is, and understanding this aspect of how it's financed and how to fix it is going to be so helpful for you.
I cannot tell you what it means to my own well-being as far as taking away one of those seven worries. And so I think you'll be so glad that you listen to today's show. You know, when I was thinking about this whole thing, there's a biblical concept that we don't often think about when it comes to social security, but it's true. In Galatians 6:2, it says, Bear one another's burdens and so fulfill the law of Christ. And so, as we have given to Social Security, we continue to do it.
You know, we absolutely are supporting the elderly, we are absolutely caring the weak. And, you know, it is a provision. Everybody, as they head off into that place of true religion, right, of widows and orphans that we talk about all the time. And so when you think about it, If we allow this To go awry, then we're not fulfilling Proverbs 13, 22. We're not leaving inheritance for our children's children.
So it is kind of in our obligation, in our generation, to fix this. And it's not hard to fix, and the quicker we do it, the easier it's going to be and less painful. But by the same token, just understanding how it's financed, I think is going to help you so much in listening to this show today, Hans? Yeah, so we're going to just take a look at 2024. Because that's the most recent Data that we have of all the money swirling around in Social Security.
And I'm doing this as a The thought that comes to mind What I'm trying to teach is simple. I'm trying to take a very complicated subject. and just boil it down and make it simple.
So let me just take a shot at that for the next A minute or two. Um So in the Social Security trust fund finished twenty twenty four With which was last december thirty first, Uh two trillion seven hundred twenty one billion dollars to the good. That's how much Social Security has in the bank. And it's really hard to imagine trillions. and to comprehend and to wrap your head around it.
Um It's a lot of money. I mean the national debt is about 35 Trillion.
So that's how much we owe as a country. that we've borrowed and that is Then even more huge number. But this is This is about seven percent. of the national debt, 2.7 trillion. But this is to the good.
This is money in the bank that's in government bonds, treasury bonds. um that sits there It's it's the money in a pension fund.
So again. I'm not simple, I'm just telling you we got a lot of money in the bank with Social Security. And working backwards In 2024, we had to actually take out of the trust fund billion dollars. But $67 billion is about 2.5% of the whole trust fund. that we actually had to spend.
to pay benefits.
So, and that's not good.
So, there's truth in what they're saying about all the headlines, which I'm not going to repeat in this simplification thing, is that.
So we're we're we're drawing down the trust fund. But that hasn't happened. You know, one of the things you taught me early on that I think is so helpful. We never touched the trust fund until two years ago, right? That's correct.
Yeah, and it's actually The year 2023, we took out money. In 24, 24, we took out money. Uh All the years prior to that, we were building up the money.
So it turned the corner. What? you know, what I want you to get from this, and I'm just giving you real numbers. We spent sixty seven billion dollars that we had in the bank. I mean, we spent it down paying benefits.
The seniors.
Okay. to a lot of you listening. Yeah. I'd really rather us at this point. be adding to the trust fund and paying all the benefits Out of money that's coming in.
Okay, so Let's talk about how 2024, how the money went around in a circle in 2024. Yeah. The benefit payments the amount of money paid to Social Security recipients Let's just call it $1.5 trillion. I mean, it's close enough. You can watch the video if you want to get the exact numbers.
but one and a half trillion dollars. Or fifteen hundred Billion. I mean, that's all the Social Security benefit payments made to all the people in the United States to collect Social Security. I mean, that's a lot of people and a lot of money. And the Social Security Administration, they pay their own bills out of this trust fund.
So when they had a bunch of, they were closing a bunch of offices under Doge. We're not closing offices, but laying off people. Um Certainly that helped in the administration expense. But let's just get clear. The seven point four.
billion dollars that it costs to operate Social Security. is paid for Um by Social Security. I mean, and so that's going to come as a surprise. A lot of people think that those people are paid for by the taxpayers, and I guess indirectly they are. But the bill for running Social Security in twenty twenty four was Um seven point five.
Yeah. billion dollars.
So the total expense of paying benefits and running Social Security was right at one and a half trillion dollars.
Okay, 1.485. Yeah. Billion.
Okay. So those numbers are too hard for people to fathom, but Um just stick with me here.
So how did we come up with a billion and a half dollars?
Well the payroll taxes For those of you that are working, during twenty twenty four 6.2% of every check Was went into Social Security.
So, and then your employer matched that.
So it was really 12.4% of every check. Goes into and that amounted to $1.3 trillion.
So most of the Social Security benefits. the 1.5 trillion was paid for out of the payroll tax. Um Not the income tax, but the payroll tax. Is this making sense so far, Robbie? Oh, yeah, it does.
But I've been through it a few times to kind of note that. You know, that there's a lot of money flowing around, like you say, but simply that. You know, most of all of it gets paid for. You know, the idea I guess I always had before you started to teach this. Was The money that was going out was the money that people put in.
But actually the money that's going out Is usually covered by the money that came in in that year from everybody that's contributing, and any extra goes into the trust fund. That is exactly right. Or if it's short, it comes out of the trust fund.
So it was putting money in the trust fund. Because We just do. We need to constantly be building that trust fund. Because when you start drawing out of it, I mean, then you start getting these stories that we're going to run out of money in 2034 and Social Security is going to blow up or whatever. like you hear in the press every year.
I'll talk about those in a second.
So let's stay on the simple explanation. To pay its benefits and run the system, the Social Security Administration needed 1.5 trillion dollars are like one thousand five hundred billion. in 2024. And the payroll tax The 6.2 percent that comes out of every check, and then it's matched by the employer. accounted for 1.3 trillion dollars.
Now we also made interest on the trust fund.
So the the the you know, the money that's in the bank. We earn interest on that. The trust fund earns interest, and that was $69. billion dollars.
of interest earned on all those bonds that sit in there in the safe. Um That's helpful toward paying benefits. And then The taxation of benefits, so all the people that pay social taxes on their Social Security, that is income tax. Um That amounted to $55 billion. And that Money out of the taxation goes right into paying the benefits.
and it goes right into the trust fund. It doesn't go in the general treasury of the U.S. I bet you didn't know that before. I didn't. But and as crazy as it sounds, because I'm one of the people that pay that tax.
Um because I still work and I'm on my social security. Um I'm glad I do. I'm like, man. You know, it I the you know, the more I get the idea of what that money's being used for. I'm glad.
Like It isn't something I'm giving to the government. No, it literally is a pass-through to the people that need the benefits and all these. you know, shut in widows out there that need the money. Yeah. And and and even the well-to-do people That are collecting their Social Security.
They paid in. They need it too for their retirement plan. Right. And even though they're well-to-do, they need it. And then because they're so well to do, they pay taxes.
And then the taxes on the Social Security get rerouted back in to pay the bills. The summary of this is that we needed 1.484. uh trillion or fourteen hundred and eighty four billion to pay the bills at Social Security, to pay the benefit payments. And then we get the money to do that from really four places. The payroll tax, which is most of it, 1.23.
Well, let's call it 1.3 trillion. The interest on the trust fund, $69 billion and the taxes on the well-to-do people on Social Security, $55 billion. And so We were only short. Sixty-seven billion dollars. In 2024, and the $67 billion is a lot, and that got pulled out of the trust fund, and that's what everybody's going crazy about.
Okay. Yeah, and I know we're about ready for a break.
So in the second part of the show, Now that you have this information, I'm going to reinforce this, but then I'm also going to. Tell you. What? Um I mean just like what we can do about this, okay?
So Yeah, I love it. I love it. And so it's a good time to remind you, as Hans said, this show is brought to you by Cardinal Guide, CardinalGuide.com. And if you go to CardinalGuide.com, you're going to see there are seven worries tabs in the effort to reduce that worry for you. You could go to the Social Security tab as we're talking about today, and then you're going to see a wonderful, wonderful, wonderful video on the same thing where they got a big board to kind of show you these numbers if it's better to see for you.
And also, you know, show notes you can look at all that stuff as far as that video is under the, again, the Social Security tab at cardinalguy.com. Plus, if you go there, you're going to find Hans's book, which he goes into this in the book as well. The complete Cardinal Guide to Planning for and Living in Retirement and an amazing workbook that goes with that. Just really great fundamental information to help you in this sort of new season that you're going to as you begin to age a little bit. And of course, my favorite, the Contact Hans and Tom page.
You got questions or you want to discuss your individual situation with them? That's the best place to go. It's all there at cardinalguide.com. We'll be right back with a whole lot more of how is Social Security financed and how can we fix it. Investment advisory services offered through Brookstone Capital Management LLC, abbreviated BCM.
A registered investment advisor. BCM and Cardinal Advisors are independent of each other. Insurance products and services are not offered through BCM, but are offered and sold through individually licensed and appointed agents. Cardinal Advisors is not affiliated with or endorsed by the Social Security Administration or any other government agency. Welcome back to Finishing Well with Certified Financial Planner Hans Scheil.
And today's show is how is Social Security Financed? And how can we fix it? We we discussed all the way it's financed and and somewhat about the trust fund. Uh the amazing thing to me when you really think about how they have fixed it in the past and the courage of our ancestors and and prior generations to set it up and then you know fix it as is as need be, you know, now this falls upon us, Hans.
Well, it does. Wh when people are arguing about this in the press. It's usually in May. of every year. And you hear about it for about three weeks.
And it's when the the the the Treasury Department or the President And the administration is required to give an annual accounting. And they do it every late April, early May. And it comes out, and I read it every year. It's about 300 pages long. And if you go find this video on YouTube or at our website, that actual trust fund report for twenty twenty four Is in the show notes.
I mean, it's there, right there. You can look at it. I don't recommend you read it, but if you want to, it backs up all the numbers that I'm giving and all the numbers that are on the board. But what I want you to get from this simple presentation Here's This is a closed system. It's a pension fund.
And it's got $2.7 trillion in it because of all the people that have been paying since 1939. You know, all the benefits going out, taxes paid, payroll taxes. And so there's just short of $3 trillion sitting in government bonds. And they Social Security. But the administration has to give a report to Congress.
And they do that. And it's written. And it's very clear. A lot of folks think That the government is just giving away the Social Security benefits to people they don't deserve. That is against the law.
It does not happen.
Okay. I mean, the only people that get social security benefits are the people that are paid in.
Okay. Um they also think A lot of people think that the shortfall is made up if the government doesn't have enough money to pay Social Security is out of your taxes. out of your income taxes and it's not. Um they can't pay benefits out of general revenues. That's against the law, too.
So I really want people to get an understanding. And I think you now, you listen to the show, you watch the video. You now are going to know more. Than the people that are making laws about this kind of stuff. Because I really think that if they really knew.
What the real story is They would act differently. Yeah, I always suspected, you know, just, you know, my old self, this was like.
Well, gee, the government runs so loosey-goosey that when they need a little extra money, they they grab it out of Social Security, but but that too is completely against the law. It is? And so Last year, 1.5 trillion was paid out and the administration costs. And then what it was paid out of. Is the payroll tax?
Interest on the trust fund. and the taxation on the benefits. Almost paid all of it. And then they robbed the trust fund of 67. billion dollars That's what we need to fix.
No. I'm not simply saying that all our problems will go away if we had another $67 billion. Because that number will be different in 2025, which will be out in May or you know and then we'll look at it we'll do a show on it Again, just Just not taking money out of the trust fund, letting the trust fund just Sit there as it is, we need to be adding money to the trust fund. And I'm going to leave it to the actuaries in that report. Um So so so this is this is not necessarily as simple as I'm making it.
But I'm also going to tell you that the problem is not as severe. the press makes it out to be or whoever you're listening to. And so um I want to give a simple explanation of a closed system And I'm going to go over the possible fixes. And the simple Must fix. is to increase the payroll tax.
Okay. Um and here you got Hans. talking about a tax increase. And I'm not necessarily recommending that, but That that's not in my usual nature. uh to be supportive of that But In order to save the system, and it's not even just saving the system, it's saving the faith in the system.
Because what I see is people that are now at retirement. coming up on retirement. Those are my customers. Those are my clients that are coming in. and they're looking to me, they're hiring me.
to tell them how to invest their money. How to buy long-term care insurance. how to set up their income through annuities so that they have a safe and secure retirement. And I'm seeing that the The general retirees' outlook of the social security system has deteriorated. People are believing all these things they're hearing in the press.
and they're thinking they can't rely on Social Security anymore. And that's what troubles me the most. because we need to rely on this system. um rich, poor, in between. We all need this system.
And we need it to be sound and I'm just going to give you an example that I just ran some simple math. Yes. is is that The 6.2% during 2024. The payroll tax as it stands right now. Raised.
In 2024, 1.477 Excuse me, it raised $1.3 trillion.
So I'm just saying if it if it in if we just in twenty twenty four, if we had raised enough money to pay the to t to pay all the benefits.
So I went back and I ran some numbers. If the tax had gone up by 1%, And that's not 6.2 to 7.2, it's 6.2 to 6.7. Because Remember that your employer matches What you pay.
So it's a half a percent. increase on the on the worker and then a half a percent increase on the employer. That would equal $130 billion.
Okay. And if we had raised an additional $130 billion In 2024 we would have had about a sixty-seven billion dollar surplus or we would have added to the trust fund instead of taking sixty seven billion out. Does that make sense? Right. And s so practically speaking, for somebody you know, like me that whatever that makes, you know, somewhere around seventy thousand dollars a year and you're talking about point zero five percent It Looks like it would be a little bit more.
That's three hundred fifty bucks extra that it would have cost you. in payroll tax in twenty twenty four To Essentially fix this problem in the short term. And and and I'm not an actuary, so I'm not pretending to be one. I just wanted to give some simple numbers. Right.
And then when you think about, you know, wow, that just And again, the other things you're given, I think, are also just really seem appropriate and seem easy, but some combination of all these things, you know, wouldn't be all that painful, $350 a year to know that, you know, gee, my kids will still have the system and, you know, all the people that desperately need it, you know, they're not going to have to worry about it. But like you say, restore the faith in it and away you go.
Well, yeah, so I'm just throwing that out there, and we could have it fit on different people. They can come up with all kinds of ideas. I'm just trying to make this simple. And a second. fix over the long term would be to raise the retirement age to seventy.
and and and not put it on people Who's that? are 60 and above.
Now So what I'd put is that raise the retirement age to 70, start a 30-year phasing. phase in that doesn't start for ten years.
So if you're If you're 57 Now it's going to stay the retirement age is going to stay sixty seven for you. If you're 56. It's going to be sixty-seven in one month. And if you're 54, it's going to be 67 in three months.
So there'd be a phase in.
So it'd be the people that are like my kids that are like 30 now. their retirement age would be 70 instead of 67. No. You know, if you say, oh, you're going to make people wait till they're 70.
Well, people are working longer now anyhow. And when the retirement age was 65, a lot of people were deceased by 6. Mm-hmm. I mean when the social security first came out. There were a lot of half the population they were never going to pay benefits to.
Anyhow, that would be another fix that could be thrown in. Um which is what they did obviously was it in the 80s? Or the same thing. Yeah, they did it in the 80s. you know, under Ronald Reagan, and they put together that bipartisan task force.
Yeah. That's when they You know, I remember my dad was just collecting Social Security. He was just filing for it. Yeah. You know, I was sitting there.
I was in my 20s. And you know, just looking at it, but they raised it from 65 to 67. but they didn't even start it for ten years. Until the 90s, and it took until now. It's not even fully phased in yet.
It's almost very close.
So That would be another fix. And there's several other things. I just tried to put. the simplest ideas forward. And I'm not.
trying to get another job where I'm gonna go tell them how to fix this system. I'm just putting some simple math on there, but I I just gotta think that if we could get a bipartisan crowd going on this is if I could get all my listeners to be in support of fixing this, we could shut down all the noise and we could start trusting Social Security again. Right. It just takes a congressman or two or a senator to begin to say, hey, guys, we can do this and we can be remembered like the Ronald Reagan years, the guys that fixed Social Security. And nobody's going to have to go through all that pain.
I think it's. It's definitely worth having that discussion with your congressman, with your senator. I love the idea, Hans. In fact, I'm going to take you up on it.
Okay. Yeah. So What this means is I'd like you to just begin trusting the Social Security. system more for your own good, for your own retirement. That's the problem I'm addressing at the street level.
I just see people coming into me. And they s they're they're a little bit angry. Um and they're they're basically you're spewing things The like the world's the skies falling. And They're doing it based on incorrect information about the gross social security system. And I'd really like you to, out of this show, I'd like you to become more educated.
Um Yeah. be able to trust, because this is the first number we put down in your income plan. And then we also Give you advice. as to when you should start Social Security. For many people, that's delaying it.
And that's harder to do when people don't trust the system. All right, well, I hate we ran out of time before we ran out of show, but I want to remind you that the show is brought to you by CardinalGuide, CardinalGuide.com, where we've got a whole wonderful video under the Seven Worries tab, the tab of Social Security that shows all this show notes and all that, plus Hans' book, The Complete Cardinal Guide to Planning Foreign Living in Retirement and the workbook, and of course the contact Hans and Tom Page. It's all there at cardinalguide.com. Great show, Hans. Thank you.
God bless you. The opinions expressed by Hans Scheil and guests on this show are their own and do not reflect the opinions of this radio station. All statements and opinions expressed are based upon information considered reliable, although it should not be relied upon as such. Any statements or opinions are subject to change without notice. Investments involve risk and, unless otherwise stated, are not guaranteed.
Past performance cannot be used as an indicator to determine future results. Any strategies mentioned may not be suitable for everyone. Information expressed does not take into account your specific situation or objectives and is not intended as recommendations appropriate for you. Before acting on any information mentioned, please consult with a qualified tax or investment advisor to determine if it's suitable for your specific situation. Finishing Well is designed to provide accurate and authoritative information with regard to the subject covered.
Investment advisory services offered through Brookstrone Capital Management LLC, abbreviated BCM, a registered investment advisor. BCM and Cardinal Advisor Are independent of each other. Insurance products and services are not offered through BCM, but are offered and sold through individually licensed and appointed agents. Cardinal Advisors is not affiliated with or endorsed by the Social Security Administration or any other government agency. We hope you enjoyed Finishing Well, brought to you by CardinalGuide.com.
Visit CardinalGuide.com for free downloads of this show or previous shows on topics such as Social Security, Medicare, IRAs, long-term care, life insurance, investments, and taxes, as well as Han's best-selling book, The Complete Cardinal Guide to Planning for and Living in Retirement and the Workbook. Once again, for dozens of free resources, past shows, or to get Han's book, go to CardinalGuide.com. If you have a question, comment, or suggestion for future shows, click on the Finishing Well radio show on the website and send us a word. Once again, that's CardinalGuide.com. CardinalGuide.com.
