Social Security, ‘broke’ by 2029: What’s not in it for you?

A new poll by the National Committee to Preserve Social Security & Medicare shows that most Americans — and presumably most federal workers and retirees — want their Social Security benefits to increase, not decrease, in the future. Previous surveys have also indicated that when it comes to Social Security, people want more, not less. Surprised? That’s the sort of results you might expect asking college sophomores if they were anxious to get old, go bald, get fat and be covered with wrinkles as soon as possible.

The American Federation of Government Employees says that most Americans want Social Security benefits increased by having wealthy individuals pay the same rate as lower-income contributors. That is by being taxed on more of their income. AFGE, which represents 25,000 Social Security workers in field offices, says the poll confirms what its members — who deal with claimants and beneficiaries every day — have long known. Social Security is a big deal. But it wasn’t always so, at least not for federal workers …

There was a time when many, if not most, federal and postal workers were happy onlookers as Social Security got more expensive, covered more people and politicians refused to make improvements because the giant program — covering about one of every six Americans — was and is considered the third rail of politics. In other words, touch it and you die. With some small exceptions, Congress and the White House have mostly ignored the growing money problems of Social Security, kicking the can down the road for new generation of politicians — and recipients — to deal with.

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Until the mid-1980s, Uncle Sam as an employer was aloof from the Social Security program. Many state governments also had their own retirement plans that were outside Social Security.

Federal workers signed up other people for the Social Security program, and collected contributions and OK’d benefits. But unless they worked in the private sector before joining or after retiring from the civil service, feds were outside in a very, very good retirement plan that was and is far superior to Social Security. Unlike Social Security, the old Civil Service Retirement System rewarded people with high incomes and long service with comparable annuity (pension) benefits. In the cases of super-long-time workers (those with 41-plus years), the starting pension equaled 80 percent of their final salary. And it was fully indexed to inflation. By contrast, Social Security has a maximum benefit that is paid, no matter how long an individual was in the system and how much he or she paid in to it. In the 1980s, CSRS was replaced — for future hires — by the Federal Employees Retirement System. FERS is better than most private-sector retirement plans. But its civil service pension formula is less generous than CSRS. And lifetime benefits are on a diet-COLA system that can limit annual cost-of-living adjustments to as much as 1 percentage point below the actual rise in inflation. Meaning over the years, FERS employees can and do lose purchasing power, especially in times of high inflation.

Most current federal retirees are under the old CSRS program. Most current federal workers, still on active duty, are under FERS. The FERS program consists of a civil service annuity component, Social Security and whatever the employee has in his or her Thrift Savings Plan account. The government provides a very generous 5 percent match to FERS employees who put at least 5 percent of their own salary into the TSP. By and large, most feds are putting money into the TSP and doing very well. There is one account worth $5.3 million, and a growing number (9,599 at last count) who have $1 million or more in their accounts. To see where you stand, click here.

Because Social Security is such an important part of the FERS retirement system, feds who once viewed it as a program affecting other people are now players. Many feds are increasingly curious (and some frightened) about the future of Social Security. A recent report by the highly regarded Congressional Budget Office said that Social Security benefits would have to be drastically reduced  to keep the fund from running low by about the end of 2029. Payments would still go out but would be reduced unless funding is improved. If you’re slow on the math stuff, like me, that’s 12 years from now. That’s a long time if you are in your 20s, 30s or 40s, a split second if you are in your 70s and 80s. So what’s the solution? Either cut benefits in the future, raise the Social Security retirement age a couple of years, or raise the level on the amount of income subject to the Social Security tax. Or all three. Will politicians have the nerve to take those steps and, if they do, will their political opponents attack them for wrecking Social Security and will voters understand, or vote them out?

Nearly Useless Factoid

By Michael O’Connell

In 2015, the most popular flavor of Ben & Jerry’s Ice Cream was Half Baked, a combination of fudge brownies and chocolate chip cookie dough.

Source:  BenJerry.com