Social Security Solvency

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This is the Truth Network. insurance, investments, and taxes. Now let's get started with Finishing Well. Finishing Well is a general discussion and education of the issues facing retirees. CardinalGuide.com, Cardinal Advisors, and Hahn-Shile CFP sell insurance.

This show does not offer investment products or investment advice. Welcome to Finishing Well, in this case certified financial planner Tom Griffith. It's great to be back with you, Tom. Yeah, thank you. And so we got a neat, neat, I love the topic today. I think you're going to enjoy it too. It's Social Security Solvency.

It doesn't sound all that wonderful, but it is Social Security Solvency for 2022. And so there's a neat thing, I don't know if you ever noted it, but the 118th Psalm, you might call it the Palm Sunday Psalm, because it's the one that they were quoting when they were going, Hosanna to the Son of David and Blessed He who comes in the name of the Lord. And those things are a quote from the 118th Psalm. But what you may not know about the 118th Psalm is it is one of the Psalms that Jesus would have sang while he was on his way to the Garden of Gethsemane that night to pray right before he was crucified. And certainly if you look deeper in the Psalm, you're going to find there is this words like bind the sacrifice to the cords of the altar and all these kind of words that show that Jesus was going to have to die for our sins. But interestingly, in the sixth verse of the 118th Psalm, it says, the Lord is on my side.

Wait a minute. The Lord is on my side. I will not fear for what can man do to me? So can you imagine Jesus in this scene, right? He's going to be crucified the next day. What can man do to me? Well, he can crucify me, but it's not going to take away his life as he makes clear throughout the rest of this Psalm.

But the point is, and Paul would make the point in Romans 8 where he said, you know, if the Lord is for me, who can be against me? What could man do possibly to us? Like we have nothing to worry about. And so the first thing we want to get across, right, when we're talking about this social security solvency is, you know, we talk about often on this show and Hans makes a point of all these seven worries with the idea we want to take away these worries and we don't want to worry is not what God has in mind. And so he has all this under control to begin with. But I think that when you see that what we report today on Soul Security 2022, that there simply is nothing to worry about.

Is there, Tom? Yeah. I mean, I think that was the goal of the show.

And we have a YouTube video that goes over the same things. It's really talking about, you know, putting some data behind this idea that social security is going to run out of money. I mean, I would be willing to bet if you went out on the street and you interviewed people and asked them and took a survey of their thoughts on social security and will it be there when they retire, you're going to get a lot of people that says, no, it won't. I can't trust it. And our goal today is really walk through and just kind of ease some people's concerns is that it is going to be there. I mean, it's going to be there for you. This was a great thing that's been set up.

It provides income for our seniors, for our widows, for our orphans. That is just really helpful for everybody. Oh, and it's amazing. And, you know, before I met Hans, I probably would have been in that group, you know, but he speaks so clearly and he takes the time, right, to read the report. It comes out every year, explains all the details. And I can tell you that it was amazing to me what we find in this report.

I'll never, ever forget the first time we went through this. And so if you hadn't heard this before, I think you're going to really be amazed at what Tom has for you. But, you know, I'm sure, did you feel the same way the first time you read the report? Are you familiar with what Hans teaches on this? Yeah, I mean, Hans had talked to me about this.

And so I kind of was in the same camp as he was just because he's been my mentor. But looking at the numbers really put some teeth behind that. It's not just talk. I mean, it's really looking into this. And so what we have on our website, and you can Google and find this, but it's each year, Social Security comes out with a report. They're required by law to do this, the report to Congress, to really lay out, you know, how Social Security is doing. And so it's very long.

I don't recommend you read every word of it, you know, unless you're really just way into it. But what we want to do today is really pull out some of the key points here and just really talk about what the report says and kind of give you a summary of what's in there. And so one of the things that I just want to the top line number that I think we should start with is how much is in the trust fund at the end of last year, end of 2021, there was $2.85 trillion in this trust fund. So this is money that they have collected, that they have saved to spend on future benefits. And so let's think about that number for a second $2.8 trillion, that is a lot of money that they have saved up. That's invested, it's invested safe, it's in US bonds. And so it's not real aggressive, it's not risky. There's some people that says it should be more risky to get some more return, but I think it's good to be conservative on those vestments.

You don't want to take a huge loss in those either. And so we have $2.85 trillion, which is about a 10th of the US, the total US debt that we have. And I know people know that numbers is large. And so there's a lot of money just in this fund there. I'm sorry to interrupt you, Tom, but one of the things I thought was reassuring that I never really had put together in my mind that Hans pointed out in your video is that that is considered part of our debt. So one 10th of our debt is actually what we owe Social Security, all of us, right? I don't know if that's considered part of our debt, but I think the point he was making is that it was just to give some context of the amount of money we have there. The 10th of what is our debt value is left in the trust fund as an asset, essentially, that we can spend for future use.

Right. Well, it does, but since it is owed to the American people, right? Well, it's not owed yet. I mean, it's the amount of money that will be owed in the future, but it's not tied to a specific thing.

Okay. But I mean, the point being, there's a lot of money in that account available for future use. And how we get to that match, I mean, how Social Security is funded is through payroll taxes. So every time you get a paycheck, you look on that pay stub, there's a line item for Social Security taxes, they withhold it, they come out of every paycheck, and it gets put into this fund. And so the money comes in from payroll, and then it goes out for benefits.

And so in 2021, the payroll tax brought in $980 billion of money from just the taxation for Social Security. So that's one piece of the revenue that it brought in from that year. Then you add to that the interest from the amount that's in that trust fund. So that $2.8 million, it's invested, it's earning some interest, and it earned $70 billion of interest on the trust fund.

So that gets added to $980. And then on top of that, for high earners, there's taxation on Social Security as well. So Social Security, if you earn its tax based off your other income, and as you earn other money, that those benefits get taxed, and that gets put back into the Social Security system. So those are the three sources of revenue for Social Security in the year of 2021. And the net result is $1.08 trillion of revenue that it brings in for the year. And so that's on the, you know, if you think of it from a balance sheet, that's money it's bringing in in 2021. If we flip over to the other side and look at what it's paying out in 2021, so this is going to be benefits for retirees, widows, you know, minors who have died or parents have died.

I mean, there's all sorts of people that qualify under this. But the amount that it paid out in total was $1.13 trillion of payments. So those were the benefits that paid out, you know, that's higher than the revenue.

And that's where that difference is. And so the shortfall in 2021 was $56 billion, which that sounds like a lot of money, and it is, but compared to the $2.8 trillion, it's still just kind of a drop in the bucket. So 2021, this is really the first year that I can remember them actually taking more out than they brought in in revenue. And that's really with baby boomers, you know, getting to the point they're retiring, and that this has been a known thing that's going to happen is eventually it's going to start pulling more money out than it's bringing in, which will draw down that trust fund. And so that's really what people, when they talk about this being an issue in this thing to be worried about, that's really what they're referring to is the fear is eventually there won't be money in this trust fund to pay the benefits that people have earned. Right. But we got to, as you said, that up until now, I don't recall a time that they ever did that. They'd just been adding to it. And now we had this little short amount, and then there's all sorts of other factors in the economy, but of course there's a lot.