Morning Commentary
Happy Birthday, Social Security… Happy Birthday to You!
It’s a little worse from wear and tear considering the fact that it was never supposed to be used. While FDR might be somewhere blowing out 80 candles, the scheme was the brainchild of Otto von Bismarck, Chancellor of Germany from 1862 to 1890.
In an attempt to push back on the rising tide of socialism in Europe, the Chancellor came upon the idea to adopt a social safety net that would never be used. By putting the government in control of the aging retired people who would spend and eschew savings.
Moreover, people would grant deeper access into their own paychecks.
Here’s the deal, it was not designed to work.
Although Bismarck was 74 when the plan was implemented, he was 65 when he came up with the idea and 66 when he first gave a famous speech declaring, if some thought it to be socialism, then so be it.
The initial retirement age was 70. It was then lowered to 65 in 1916.
Fast forward to FDR’s largess of government goodies; this was perfect. Again, knowing actuarial tables, FDR’s team understood that promises were rarely kept and that Americans did not live long enough back in 1935.
The lifespan in 1935:
Now, the scheme is broken with the disability part going bankrupt next year. The big program will run dry by 2034, where it will only have cash to pay 79% of the promises. If you are under the age of 40, and you do not have a backup plan, shame on you.
The Market
This bull market is looking pretty tattered, too. Stocks are trying to put in a bottom, but the hits keep coming and most are out of leftfield, when experts in the sweet science say they are the ones that knock people out!
Today’s Session
The major equity indices opened lower as expected. The Bureau of Labor Statistics (BLS) released its monthly producer price index (PPI) report. During the month of July, prices for final demand products rose by 0.2% month-over-month following a 0.4% gain during the month of June. Year-over-year, final demand PPI is down 0.8% after falling 0.7% in the prior month. When excluding food and energy, core PPI rose by 0.3%, the same amount gained in June. Year-over-year, core-PPI rose by 0.6%, a bit slower than the 0.8% gain observed in June.
Comments |
WOW....Bismark was a great thinker! Karin on 8/14/2015 9:58:36 AM |
Charles, i think you are being optimistic with only 40 year olds needing to worry. The way things are likely to happen if you are under 60 and have any private retirement saving your SS benefit will be cut or unavailable until you exhaust the private funds. Not to worry though, Obamacare will start lowering that pesky life expectancy shortly. Scott Manhart on 8/14/2015 10:20:18 AM |
Not to worry Obama's legacy agreement with Iran will blow us all into our after life in a few years. I am serious. Frances Wiggins on 8/14/2015 11:42:23 AM |
I Agree with Scott starting at 40 and younger may not be old enough. They changed the law in 1983 starting with those born in 1940 and later. Given that nothing will change until 2017 then if we go back 43 years like before then those born in 1974 and later would get hit. To me todays 40-50yrs have the most to worry about because they would get caught twice, Corporate retirement changes and then Social Security with little to no time to adjust! Steve W on 8/14/2015 1:00:47 PM |
Social Security and Medicare are the largest Ponzi schemes in history! Jon S on 8/14/2015 2:10:33 PM |
I'm 76, they robbed of SS monies since I was 15. They again stole it from the fund and pissed it away on pet projects. Now Obama wants to put the illegals in the SS system. It's time for the politicians to do some thing correct. Lets put them on a slow boat to nowhere. Phil on 8/14/2015 4:00:54 PM |
I took my SS at age 62. What percentage of recipients take it early? There is an upward age scale for taking the full amount later depending on year you were born. The money has been taken out and squandered. How much would be there if it had been left to accumulate? Kay on 8/15/2015 11:12:04 AM |
What's everyone worrying about, the IOUs are safely tucked away in a "lockbox" in Wash. DC somewhere! There'll be plenty of $$$$ to go around. Jim on 8/15/2015 10:42:38 PM |
SS is truly a TAX that is portrayed as a term live insurance policy; the rate is nearly 15% cost! add medicare tax; add healthcare tax; then add local taxes -- states taxes -- federal taxes 15%; tell us what's left in that pay check for disposable income and SEP saving? its a wonder only 47%+/- have given up and entered entitlement camp! Steve on 8/18/2015 10:41:01 PM |
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