Future of Social Security script followed by clips
Social Security has long been a cornerstone of retirement planning, yet many wonder
if it will be there when you need it. Join us this week as we dissect the current
challenges facing Social Security and discuss how retirees can plan for a future
where reliance on this program may shift.
Hello and thanks for joining us for this episode of Leibel on Fire. I'm Freddie Bell
and I'm with Leibel Sternbach. He is the man. He's Amazon's bestselling author of
living with financial anxiety and also the author of the book, Authenticity. He also
has a website and we'll get into more of that a little bit later. It's yields4u
.com And I want to introduce the man, Leibel Sternbach. Hello, and welcome back.
Hey, how are we doing today? - Unbelievable. And social security, a lot of times,
I have a difficult time saying those two words, but it's such a big piece of a
lot of retirement programs. It's been a cornerstone of retirement planning. Yet a lot
of people wonder if it'll be there. What are your concerns with the long -term
viability of social security Leibel? So, the long -term viability of social security,
well, let's put it this way. I don't think when I'm ready to retire and collect
social security, it probably will not be similar to the program that will exist at
that point. Probably will not even be a pale reflection of what it is today. Social
security has a fundamental flaw built into it. It was something that They were aware
of when they designed the program, but there were checks and balances put into it.
What Congress does, which is they raided the piggy bank, and they removed all the
safeguards and they protected their personal interests at the cost of future
generations. When Social Security was first established, it was based on several
premises. Number one was that it was not going to be the primary retirement income
for most people, right? That was number one. It was designed to keep people out of
poverty. That was its only purpose was we had workers who would work their entire
life. And then they would get to a point where they could no longer physically
work. And their families couldn't support them, right? So they were becoming homeless.
And nobody wanted these homeless people who had served the country their entire life
to be out in the streets, in the cold without food. And so the government came up
with a program and in a lot of ways it was to combat communism because communists
said, well, we take care of our workers, we're for the people,
or we're not for personal gain, it's all for one and one for all, and we're going
to take care of you. FDR came up with the Social Security Program as a way to
combat the influence of communism in America and to create a social safety net.
Come somewhere in the middle, somewhere between communism and capitalism, and provide
a safety net. But it was designed to be a safety net, not a retirement income
plan. And it was also designed on the fact that the average life expectancy was 65
at the time. So most people would be on the program for five, maybe seven years,
and then they would die very nicely, right? They had the good graces of not living
to 100 as we have 10 % of social security pretty beneficiaries living beyond.
- Now things have changed. - Right, how things have changed. So first, you had most
people at that point in their lives were, you know, for the most part, invalids
because they worked very hard jobs. They had serious health issues as the result of
those jobs and they just needed, it was really money to provide for their families
so that they didn't kick them out and they had money to pay to take care of them
and feed them. Over the years, that program has expanded, and people have started
living longer and longer. In the benefits that corporate America provided shrunk more
and more. It used to be corporate America provided pensions for life. My wife is
still lucky enough to be covered, but somewhat by a pension for life
It's having been a state employee, and I'm lucky enough to work with plenty of
federal and state employees who have pensions for life, who make more of their
pensions than I have ever made as a WTO employee. It's always interesting to see
that. But the corporate American, most Americans were not covered by that. 85 % of
Americans are employed by small businesses, and small businesses couldn't afford --
they really can't afford to keep is someone who's no longer producing value for the
company. And so then came along, the 401 (k) programs were a way of shifting the
value proposition of we're going to pay you for life too, we're going to help you
save for retirement, and Social Security got put into that mix. But fundamentally,
the flaw in the program of Social Security is that it relies on two things to be
true. Number one is it requires that more people are paying into the program than
are receiving benefits. Fundamental in the math that requires that. Number two is it
fundamentally requires that the money that is being put into the program is being
used, is being invested and is growing. So that during your working years, the
little amount of money that you put in that you saved is going to turn into most
of the money that you're going to be drawing during your retirement years and that
the amount of money that isn't covered by that is being covered by the additional
employees that America has created that are paying into that program. Unfortunately,
both of those things are not true. They were very nice design features, but the
first problem is that we didn't invest the money. What we did was in an effort to
shore up the budget, Congress, in their great wisdom, put two caveats on the
trustees of the Social Security Trust Fund. They said, "You can only invest the
money in federal agencies or the federal government." Essentially, they said, "This
money that should have been invested and should have been growing is you're just
going to give it back to us. We'll give you a small interest rate, but you're
giving it back to us." That's number one. Number two Yes, they also said that they
can borrow against that to fund wars and whatever flavor of the month program they
decided to run. They've depleted that trust fund that was supposed to be there for
us in the future. The second problem is that the generation that is retiring right
now is the largest generation in American history. We are not replacing them.
Not only are we not replacing them, but our population growth has shrunk.
We are facing a population crisis in 2050 that the only possibility of offsetting
that population crisis is with immigration. So, all of these things of controlling
the borders and building walls, it's a little bit of a red herring. Yes,
We need to have legal immigration, but our legal immigration needs to be greater
than what our illegal immigration has been. Otherwise, we're going to be facing a
real crisis of all we're going to have as a country of old people who can't afford
to do the things that they need in order to survive, right? Which is what Japan is
facing. So, talk about the role, then, it sounds like you said it at
the beginning, and we know this about Social Security, that we talk about the role
that personal savings, pensions, investment portfolios, and the like play into us
having a stable retirement. What we need to understand is that social security is
not going to -- we can't count on social security being there for the long run.
Well, you've heard a heck out of me about that. Yeah. It's not going to be there
20, 30 years down the road. Social security is going to have to cut the checks
that it's making. Okay. Even -- they're estimating even, you know, within seven
years.
That means to us as retirees, as people who are counting on Social Security to be
part of our retirement income, is that, number one, we need to plan for Social
Security to not-- the Social Security is going to be reduced at some point.
The question is whether it's going to be reduced in the beginning of a retirement
or at the end of a retirement that is up for grabs, but we need to have a backup
plan. Social security cannot be our only plan, which means that a certain amount of
our money cannot go towards current income. It has to go for future growth.
It has to be used to offset those later years in life where maybe we're gonna have
to pay for someone to come in our home and take care of us, whether we're gonna
have to pay for a nursing facility or long -term care, or assisted living,
or replace social security when those social security is decreased. Now,
realistically speaking, I can hear all the people in the comment section talking
about the fact that social security is not going to go away, they can't afford the
votes, they can't afford to lose the votes, and you're 100 % right. Social security
is not, they're not going to do anything that's going to look like a reduction of
benefits. There is never going to be a politician, at least in the next 30 years,
who comes along and says, "We need to reduce social security benefits because they
will not get reelected." What they will do, and what they have done for the last
10 years, is they have reduced benefits to new beneficiaries, and they've done it in
ways that people don't understand. For instance, a few years ago, they passed
something called the Deemed filing rule. Deemed filing rule says that if you file for
one benefit, you're deemed to have filed for all your benefits. What that effectively
did, and nobody understood it at the time, other than a handful of geeks like me,
was they were reducing the amount of total benefits that someone could receive.
'Cause prior to that, someone would receive benefits and they would file for their
spousal benefits and then suspend their own benefits and allow it to get delayed
retirement credits. And then, once they got the full del -
understand it when you told them that you were taking it away, right? Because they
were able to frame it as we're making rich people who are taking advantage of the
system not be able to take advantage of the system. So, I think they're going to
reduce benefits in ways that we won't predict, and it's going to be on future
beneficiaries. I think they're going to reduce inflation increases, so it's not social
security just won't keep up with our expenses. That $1 dollars that we're getting
today is not going to go as far. When I was a kid, they did that. I remember
very vividly that there were my neighbors who were living on social security, and
they just became livid because Social Security made some adjustment, and people went
from being able to pay for their rent to only being able to pay 50 % to 60 % of
their rent with their Social Security check. It was because of the inflation and how
security recalculated the inflation adjustment. So I think those are the things that
we got to worry about. - Well, that's gonna keep me up at night, but we're just
about out of time, but I'm just really curious. It seems as if that it's crucial
to start planning now, even if social security is completely intact. What can we do
to start taking steps to day label to make sure that we're not cut off guard for
the inevitable changes that that are coming, you've made us completely aware of that.
- Yeah, no matter what social security reductions are happening. The question is when
is it gonna happen in your lifetime? I think the thing that you got to do is
number one, you gotta be constantly updating your financial plan. You gotta be
determining when is the ideal time to file for social security. You also gotta be
considering whether filing earlier so that you don't get swept up in those future
changes, right? Because the way Congress is gonna make these changes is gonna be for
future beneficiaries. And so that is one of the non -financial arguments of why you
should file early. It's not because you wanna get more money. It's because you wanna
lock in the rules that we know what they are today because they're very unlikely to
change rules on beneficiaries. And then you've got to make sure you have a financial
plan that with or without social security, right, that it's, you've got that safety
net so that if social security is not going as far down the road, you have a way
to protect yourself. That makes a lot of sense. And you can also go to yields4u.com for additional information. Yep, yields4u .com. We've got a whole lot of
information about this. We've got a webinar that we do on social security on a
regular basis. We've got tools for trying to figure out when to file early, file
late. And again, I highly recommend you take us up on that free retirement tax file
analysis because that is where we take a look at that and figure out for you
specifically filing early filing late with your spouse, when should you file and what
gets you the most money and the most safety margin in your retirement plan. He's
Leibel Sternbach. I'm Freddie Bell. And That's all the time we have for this deep
dive into Social Security and its future, whether Social Security evolves or you need
to learn or lean more heavily on your personal savings. We've learned today that
proactive planning remains the key ingredient in all of this.
