Social Security Is Not A Ponzi Scheme You Twit

Social Security is not a Ponzi scheme you ignorant twit.

Elon Musk, the DeFacto emperor of the US recently called social security a Ponzi scheme. This is simply no true. For him and his Republicans supporters, the following is information and perspective.

Led by by FDR, Social Security was enacted in 1935 during the Great Depression. Unemployment was in double digits maxing out at 25%. Only a few older people had pensions and many used up their savings early in the Depression. For those that could work, jobs were difficult to find especially with younger people competing for the same jobs. Social Security was enacted to give older people a minimum income on which to survive. Initially payments were a lump sum. The first monthly check was sent in January of 1940 and it was for $22.54.

In 1935, a person was not eligible for benefits until the age of 65. Life expectancy in 1935 was 61 white males and 65 for white females. For black males and females it was ten years less respectively. The reality is at the beginning, most did not live long enough to collect benefits and for those that did, they were minimal. However, for the first time, those who lived to 65 or longer, knew they would have a minimum income.

Social Security has had many changes and upgrades over the years. Currently, note the following:
* Life expectancy for a male who retires at age 65 is 19 years or age 84. For a female age 65 it is almost 22 years or age 87. For a couple age 65 the there is a 47% chance at least will live at least until age 90 and a 20% chance at least one will live past age 95. The biggest change is when social security started, the majority did not live along enough to collect benefits while today the majority of retirees collect benefits for years after their retirement.
* As of 2023 about 71.6 million people received social security benefits. This about 20% of all US residents.
* The average annual benefit for a retiree starting at age 65 is about $18,000 while a retiree who waits until age 70, the average annual benefit is about $24,000.
* About half of retirees 65 or older receive at least 50% of their household income from Social Security and for about 25%, it is at least 90% of their total income.
* Even with Social Security, about 10% of retirees live below the poverty line.

For Musk Republicans who think cutting or ending social security will solve US financial problems, let me tell you what I think will happen. This based on well over 30 years of owning a financial planning/money management firm. It is also based on being a Certified Financial Planner while working and having a Masters in Financial Planning plus years of continuing education. Finally it is based on not being an idiot.

Without social security I believe the poverty rate for retirees will increase dramatically. Here’s why. At age 65, depending on selected variables, it would take about $225,000 to buying a life income annuity paying $18,000 annually. At age 70, again depending on selected variables, it would take about $300,000 to buy a life income annuity paying $24,000. The median net worth for households age 65-74 is $410,000 and ages 75+ is $334,700. The actual net worth for the bottom half in those age groups ranges from zero to the previous number. So after deducting home equity from the total net worth from the bottom half plus those that are between the median net worth and top 20%, how many retirees would have enough investment assets to maintain a comfortable retirement? Very few? Most would move from comfortable to poverty.

What else would happen?

I believe the housing market, especially in retirement communities, would decline, possibly fall off the table. It is estimated as many as 20% of retirees own two homes The very wealthy have enough money to have two homes without social security, but many if not most retirees are able to afford a second house because they have a combination of retirement assets and social security benefits. With no social security benefit I would guess most retirees would sell one residence. And without social security, the number of potential buyers will also decrease. More sellers, less buyers, is never good for the real estate market.

For at least 50% of retirees social security provides the basics. For retirees who have other assets, social security enables them to have discretionary spending which include restaurants, general merchandise and travel. Social security is an economic multiplier. The benefits retirees receive flow through the economy. In 2023 social security paid about $1.3 Trillion in total benefits to retirees. If Musk/Trump and Republicans pull over $1 Trillion out of the economy its going to be ugly, very ugly.

Do I think this could happen? Very much so. Neither Musk or Trump have any respect for American workers. Trump is a trust fund baby and Musk was born into into wealth in South Africa. They have no understanding of the importance of social security to the millions and millions of Americans who have worked their entire lives making a living for themselves and their families and now want to enjoy retirement. Social security does not make retirees rich, but does provide a minimum income which along with personal savings and investment can lead to a comfortable retirement. And for all the retirees with no savings, social security keeps them out of total poverty.

Musk/Trump and supporting Republicans are ignorant twits. Social security is not a Ponzi scheme. Millions upon millions of Americas contribute to social security and then after qualifying for benefits, receive a basic income for the rest of their lives. Social security payment to retirees are based on their contributions over the years. The surplus was invested in a Trust Fund for the future.

It is estimated the social security Trust Fund will be depleted 2035. If changes are not made, this means retirees will receive about 80% of their previous benefits. There are essentially two reasons for this. Benefits have increased as has life expectancy dramatically increasing total payments to a retirees. Both of these a good thing. Any financial challenges social security is having is not neither the fault of workers or beneficiaries. And the financial problems can be fixed.

If you are worried about your current or future social security benefits, then I would recommend first you contact your elected officials emphasize your support for social security. Also I would recommend you vote only for Democrats. Social security is a Democrat baby and they both initiated the program in the 1930s and supported it since then. [Note: I am an Independent and have never belonged to a political party.]

The Musk/Trump policy to end social security will not only devastate the majority of retirees but also have significant negative consequences on the economy. There are very reasonable ways to improve social security and they all start with voting every Republican who supports Trump/Musk on social security out of office.