The above statement came from another website called Motley Fool. Is it really true. I am moving to central california in a month and need a loan to even move up there but my loan comes with an interest rate of When these conditions are met, it can be said that under the assumptions used, program financing is projected to be adequate for the foreseeable future.
This concept was fully developed and in place by the time of the — Social Security Advisory Council and was used by the council as a guide for constructing alternative reforms for the OASDI program. Since that time, the concept of sustainable solvency has been addressed by virtually every comprehensive reform proposal developed by all policymakers.
Requiring that proposals meet the requirements of sustainable solvency provides strong assurance that we will not face substantial projected deficits for the OASDI program soon after enactment of the next comprehensive reforms for the program. An additional measure that has been used extensively in recent years is the annual balance between tax income and program cost for the 75 th year in the long-range projection period.
Although the overall shortfall for the period as a whole is shown to be 2. Thus, individual reform provisions can be more fully understood by considering both their effect on the year actuarial balance as a whole and their specific effect on the annual balance for the 75 th year. Both of these measures are provided for individual provisions scored by the Office of the Chief Actuary.
More recently, significant attention has been paid to additional summary measures such as the year and infinite horizon open group unfunded obligations. An open group unfunded obligation shows the shortfall of revenue to cover all scheduled benefits over the period as a whole. Taken alone, this value can be easily misinterpreted as being relevant as a shortfall in terms of today's economy, as if it were an amount that is required today. In fact, this present value amount represents the sum total of shortfalls projected for , after the combined trust fund is projected to become exhausted, through These shortfalls will be met by providing either additional tax revenue in those years or by reducing benefits over this period from the level currently scheduled.
For this reason, the trustees provide the size of this year unfunded obligation as percentages of OASDI taxable payroll 1. These percentages provide context for understanding the magnitude of additional tax revenue that is needed to fully meet the unfunded obligations represented by the currently scheduled benefits. Of course, these values must be considered in the context of the high level of uncertainty that accompanies any projection extending beyond the year, long-range period.
In addition, the Trustees Report provides an estimate of the closed group unfunded obligation. This value is highly theoretical in nature, as the closed group unfunded obligation is only truly meaningful for a program that is intended to be "fully advance funded.
For this kind of financing, the closed group unfunded obligation would be expected to be zero or near zero. For a program that has been intentionally financed on a PAYGO basis, however, a large closed group unfunded obligation would be expected. This uncertainty is thought to increase for more extended periods into the future.
The trustees attempt to illustrate the nature and extent of uncertainty in the annual reports in several ways. Mentioned earlier are the high-cost and low-cost alternatives to the intermediate sets of assumptions. These alternatives provide scenarios in which the principal assumptions used for projecting the financial status of the program are assumed to collectively differ from the best estimate in either a positive or negative direction.
Each parameter is assumed to differ by a plausible amount from the intermediate expectation, so it is unlikely that all parameters will differ in the same direction. As a result, the three alternative projections produce a broad range for the prospects of the program.
Trust fund levels expressed as a percent of annual program cost were presented earlier for the three alternative projections. The trustees report also presents sensitivity analyses showing the effect of variation in individual parameters. These estimates provide a sense of the sensitivity of the long-range financial status of the program to any difference that may evolve in a given parameter from the trustees' intermediate projection.
Finally, the trustees report presents stochastic projections of the potential financial operations of the OASDI program in the future. For these projections, many economic, demographic, and disability-related parameters are allowed to vary randomly through time, creating 5, separate possible projection scenarios. The random variation reflects the degree of historical fluctuation in each parameter and is intended to simulate a large number of scenarios that could occur in the future.
Results are presented in the report for the future cost and trust fund levels of the program, showing year-by-year the distribution of results from the 5, separate projections. Stochastic results have the advantage of showing an estimated likelihood that actual results will fall within or outside any probability interval.
It should be noted that lines on this chart do not represent specific individual simulations. Rather, for each line, the value in a year is for the simulation that is at the given percentile in that specific year.
For any percentile line, the specific simulation from among the 5, scenarios will vary from one year to the next. The stochastic projections suggest a high degree of certainty that the combined OASDI trust fund will become exhausted well before , the end of the year, long-range period. It should be noted, however, that the stochastic projection methodology is still being developed and refined. Workers can protect the higher retirement benefits available by taking DI benefits at the early retirement age of 62 and waiting until their full retirement age to collect OASI.
DI also creates disincentives for people to return to work: individuals who qualify for DI can also apply for Supplemental Security Income and government health benefits that they may lose if they return to the workforce.
Thus, the outdated criteria it currently relies on—such as age, education level, and language proficiency—should be eliminated. Failing that, relevant ages should be increased by at least five years. Retirement Security. Related Content Expert Commentary. Jan This constant process of spending money the moment it comes in has left us financially unstable, and has put the future of social security at risk. That is three years earlier than projected last year.
For the first time since , Social Security has to dip into the trust fund to pay for the program this year. Congress can kick the can down the road for an extra decade or two by backstopping the funds with more general public debt like they did with the FDIC and the other insurance bailouts.
After that, some painful austerity will come around. This extraordinary dependency on Social Security by all but the wealthiest Americans helps to explain the political sensitivity of the program.
Many lawmakers and public policy experts worry about the program eventually running out of money as more and more baby boomers retire, absent significant changes or cutbacks in benefits. Thirty-nine percent said they faced a major health need or problem in their family that kept them from saving. The budgetary implications of Social Security are huge of what is essentially a pay-as-you go program.
Workers pay Social Security payroll taxes into the program and money flows back out in the form of monthly payments to beneficiaries. Social Security also provided benefits to 2.the “Free Loan from Social Security” strategy he will collect benefits equal to area A and earn interest on A equal to A´, but he needs to pay back only area A. In total, then, this individual would end up with a Social Security benefit equal to areas B and C and an invest-ment gain equal to A´. 6 .