For the umpteenth time, don’t rely on Social Security

A federal court has just issued a ruling that has direct implications for everyone relying on Social Security for retirement income, now or in the future.  Sovereign Man reports:

Ever since the mid-1990s, police officers and fire fighters in the town of Cranston, Rhode Island had been promised state pension benefits upon retirement.

But, facing critical budget shortfalls over the last several years that the Rhode Island government called “fiscal peril,” the state legislature voted to unilaterally reduce public employees’ pension benefits.

Even more, these cuts were retroactive, i.e. they didn’t just apply to new employees.

The changes were applied across the board; workers who had spent their entire careers being promised certain retirement benefits ended up having their pensions cut as well.

. . .

Last week the First Circuit Court issued a final ruling and sided with the state of Rhode Island: the government has no obligation to honor its promises.

. . .

Social Security is in even WORSE condition that the State of Rhode Island’s perilous pension system … According to the Board of Trustees for Social Security … the Social Security trust funds “become depleted and unable to pay scheduled benefits in full on a timely basis in 2034.”

. . .

The First Circuit just showed us what the solution is: cutting benefits.

And now the government has legal precedent to do so.

They can retroactively slash whatever benefit they want in their sole discretion regardless of what legislation exists, or what promises have been made in the past.

There’s more at the link.

The Sovereign Man report omits a very important detail.  Social Security is already stiffing its recipients by using a deliberately falsified, wrongly calculated measurement of inflation, which is drastically understated in the official figures.  This allows it to provide annual cost-of-living-related increases that are far below the actual increase in the cost of living, thereby cheating recipients out of money they really need.

Even with this deliberately minimized calculation of inflation, Social Security is running out of money.  According to SS’s own claims, it’ll run out of reserves in sixteen years from now.  It’ll still have its current income, of course, but that won’t be enough to pay out all claims if there are no reserves on which to draw.  The solution is very likely to be what Sovereign Man posits:  a reduction in benefits across the board.

If you were, or are, or expect to be, reliant on Social Security to fund your retirement, you need to make plans to supplement it from other sources.  Now.  If there are no other sources readily available, families are going to have to consider helping each other, with younger members assisting older ones financially and in other ways – just as our grandparents did when they retired.  I remember my maternal grandfather and grandmother living with my parents until they died, in the early 1960’s.  There was no question about whether that was “fair” to my parents – it was simply necessary, so they did it without a second thought.  That’s how society functioned, back then.  Perhaps we’re headed that way again . . .



  1. Meh. Been happening for a long time, why should gov't employees be immune to the treatment that everyone else gets with gov't approval? And thier pension was cut? Cut? oh my, how would they like to have it eliminated after 20 years of contributions?

    Wake up folks, its here now. Look what you did to railroad, steel, auto, airline employees. Whats that old line about throwing babies from the sleigh?

  2. Grrr… Stop giving it to every Tom, Dick, and Harry or should I say every illegal that makes it across the border…

  3. "There was no question about whether that was "fair" to my parents – it was simply necessary, so they did it without a second thought. That's how society functioned, back then. Perhaps we're headed that way again . . ."

    Wow, you are optimistic. With the current generations of self-absorbed, materialistic whiners?

    My retirement plan is funded from partial retirement at age 64 to age 79, then it shifts to the "full" retirement – – a .45 slug to the brain pan before (hopefully) my money and my health run out.

  4. 1) When the fund gets too close to default, Congress raises the contribution rates. They have done that several times in the past.

    2) Social Security is a tax that the government send a portion back when they see fit. You have no say in the amount.

    3) The Supremes already ruled that until you draw on it, all the money in your pension plan belongs to the employer.

    4) You right, you better have some savings of your own if you plan to live till your 80's.


  5. Social security has a vault full of IOUs but they'd have to start taxing social security to pay them off 🙂

    It wasn't too many years ago that you worked until you died. That is always an option.

  6. That is all bad enough – but my worry is that the gov't will start clawing back the shortfalls from those that DID save for their retirement by going after their RRSP's.

    They did it in Cypress, where savers got a 10% financial 'hair cut'. I am stashing cash and stacking metals like crazy now. Our RRSP's can buy a LOT of votes from stupid people that didn't save a dime for their own retirements.

  7. @Glen, that's already been floated a number of times. The last time they floated it, they tried to make it sound good by saying they would "even out the fluctuations of the markets (Enron was mentioned as a scare tactic) by seizing the savings, and issuing a Treasury bond backed by, 'the full faith & credit of the U.S. Government'."

    Of course, they are assuming people are so stupid that they won't figure out that Treasury bonds are only good as long as the fait currency doesn't fail. Once that happens, they become worthless paper, but by that time, they will have fulfilled their real obligation. To allow the politicians more money to "tax & spend."

  8. They could do a few things to stave off disaster for a while providing for the truly needy.

    Means testing. If you have a retirement income of say 50k per individual then you don't qualify for SS. Yeah I know you paid in but you're not getting anything back. Sorry. Take it up with that lying power mad POS FDR.

    Remove the income caps on SS contributions/taxes. Yeah I know you'll never see a dime of that money but we've gotta pay for the greatest generation's greatest debacle. Again, take it up with FDR. He's buried in Hyde Park New York.

    Encourage or coerce younger wage earners, say under the age of 35, to invest 15% of their income into retirement accounts and make it extremely difficult if not impossible to get at that money until they are retirement age. Even go as far as to make it untouchable in case of bankruptcy. Give every benefit and tax break possible to encourage privately funded individual retirement plans. Do the same with public pensions. Also encourage and coerce them into a comprehensive disability insurance policy.

    Be honest with the American people and admit it is a scam and always was. Tell the younger wage earners that yes you're going to be paying SS taxes but no you're not going to receive any benefit. The preceding generations created a ponzi scheme built on lies that was fiscally untenable. You unfortunately are going to be the generation who gets to foot the bill for their lies, but with the incentives for your private savings you'll control your own retirement, be much wealthier and can pass that wealth on to your family or however you see fit. Social Security then has a firm death date and upon the last beneficiary dying in 2000 whatever, the taxes are rescinded and the Social Security bureaucracy is eliminated.

    The private disability insurance is vital. I've seen what government disability insurance looks like. A close friend was injured in college when he was in his early 20s. He simply can't work. I have his POA and have taken care of his finances when he has been incapacitated in the hospital. As of a couple of years ago, after deductions for Medicare, prescription drug plan and such he had about 550 dollars a month to live on. He had no other assistance. He might qualify for food stamps or something but won't apply. After medications and basic bills he had less than 100 dollars for food and gas a month. Every little life annoyance, fridge dies, car needs brakes etc is a full on financial crisis. It's no kind of existence. It has to be impressed on people that once you turn 18 you must have disability insurance and you must begin saving for retirement as soon as you enter the workforce. Hoping something doesn't happen and counting on the .gov to take care of you is no kind of plan.

  9. The whole SS issue is part of why I took the job I'm in now, figured if it wasn't going to be around when I retired there was no point paying into it in the first place. Figure my State has more saving then the Feds and we are set up a bit different then Rhode Island so that ruling doesn't apply to my situation. Also making sure I have enough saved for retirement outside of work connected programs, but most people aren't willing to live with a 50%+ savings rate to do that.

  10. They don't need the 4th Circuit ruling. The Supreme Court already issued precedent on Social Security in Flemming v Nestor 363 U.S. 603 back in 1960. In the case the Court held you have no property or contractual interest in your Social Security contributions nor benefits – Congress can adjust as it as they deem fit.

    There's no right to it, anyone who claims you have some kind of right to it or it is yours being held in a lockbox is lying to you, and it's simply a tax by another name that you pay and the government then doles out as it deems fit.

    Does that suck? Yes it does, but that's the reality of it, and any other proclamation from a politician that social security contribution are guaranteed and you'll be assured of getting a payment is just so much hot air.

  11. and factor in the Windfall Elimination Provision. It just knocked me out of drawing on my late wife's disability, and will cost me 70% of my eligible benefits when I hit age 66 next year. The only way around it is to work and pay into SS for a full 30 years, which would put me at 75+ before I could retire. Government sanctioned theft laws written by millionaires in Congress to steal from poor people…

  12. IIRC, Bush 43 raised the concept of allowing SS contributors the option of putting a portion of their SS deduction into a private retirement fund. AARP blew a fuse, the Dems raised a holy stink, and the idea died a-borning.

    There's no way that the socialists in the Democratic Party will permit tinkering with SS. They believe they'll never run out of other people's money, the Iron Lady's speech notwithstanding.

  13. Social Security is (and ever has been) naught but a Ponzi scheme, not money in the bank. By all means, take whatever you can get, since it was taxed out of your hide at 0% accrued interest, but never, ever expect that it will be enough, or last long enough. Neither are likely.

    Fiat bux are currency, and not money, whether they are in the bank of not.

    Only things that you actually hold in your hand and have intrinsic worth are money, whether than means gold, silver, lead (conveniently loaded into brass cartridges), rice, fresh eggs, or whatever.

    If you want retirement income, set up income streams that pay out despite the efforts of the .gov, or even despite your own (dis)abilities.

    Or else, learn to love the taste of Dinky Doo dog food, as you cruise the Wasteland in your supercharged GTO, in search of gasoline.

  14. This is incredibly frustrating to learn as Social Security already cuts my benefits due to a very small state pension I get. The pension in no way makes up for the amount Social Security takes out (and SS says I cannot opt out of the pension) but they take it out anyway.

Leave a comment

Your email address will not be published. Required fields are marked *