Social Security has always been among the biggest, most crucial pension systems since it was created. Today tens of millions of Americans rely on it for their retirement. In fact a stunning 62 percent of its members obtain half or more of their retirement income from the program, per the Social Security Administration.
Besides this, over 22 million American retirees would live beneath the official poverty line without its contributions, according to the CBPP Center on Budget and Policy Priorities. This means that any significant reduction in the program would lead to disastrous consequences for millions of Americans.
Yet the latest report from the Social Security Administration is not encouraging. This 2017 Trustees report warns that the reserves of the trust fund will be exhausted in 2035. They go into agonizing details describing how terminal the fund’s financial state will be in the next decade plus.
The problem is that Social Security takes in a massively insufficient amount of revenue for the benefits that it pays out. The Trustees have solutions to the problem, but they are traumatic. One of the primary ones is to enact “immediate and permanent reductions” for all present and future program recipients’ benefits.
The people making these suggestions are intimately familiar with the program and the consequences of such drastic actions. The Trustees are none other than the U.S. Treasury Secretary, the Secretary of Labor, and the Health and Human Services Secretary.
It begs the question why the program is in such dire straits. The unemployment rate may be lower than it has been in over a decade, yet the critical Labor Force Participation Rate remains mired near its lowest point in many decades. This translates to a lower number of individuals working who pay to support the Social Security program, as the graphic shows:
Social Security reveals that it needs three working people to pay the benefits of each retiree. The worker to beneficiary numbers began to decline dangerously back in 2010. This was the first time it declined to under three. By 2013 it reached 2.8. Projections from the Trustees state that it will keep falling until it reaches only 2.2.
What magnifies the problem is that today’s retirees are living longer than when Social Security was first created in the 1930‘s. In fact the life expectancy in America is now eighteen years longer. It will force the program to pay benefits to its beneficiaries for years more than they originally planned, intended, or had to in the past.
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The cost will be unsustainable in the end. Yet this is not a news flash. To their credit, the Social Security Trustees have been warning for a number of years that the program could not be financially sustained. Yet politicians have simply shrugged off the problem as too far out to address. Every year the end of social security or a drastic solution become much more necessary. People will realize this well before 2035 as the eventual tragic date gets closer.
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