Social Security in America is bankrupt, and tens of millions of domes on the way to poverty

In April 2024, American Social Security published his annual report to 2023. As of the end of that year, the number of pensioners is entitled to America’s 50.1 million, and they received from Social Security in December 2023, retirement payments of about $ 95 billion, about $ 1,800 per person. Another 7.4 million Americans received about $ 11 billion as a disability allowances, etc. As of 2024, about 68 million Americans, of which about 55 million over the age of 65, received various payments from the American Social Security in a total of approximately 1.5 trillion dollar.

Multiple retires and extended life expectancy

Social Security payments are a major source of income in many pensioners. According to American Social Security data, they are already at least half of the income of 40% of ages 65 and above, and at least 15% are 90% or higher. When it comes to ages 75 and up or in women living alone, the number of dependence is fully jumping over 35%.

But this income, which is critical to tens of millions of adults, is at risk. According to the National Insurance Report, in 8 years all the funds accumulated in the institution. These funds, whose amount at the end of 2023 was about $ 2.8 trillion, are entrusted to the US Ministry of Finance, which uses them to finance his ongoing deficit. The reason for the approaching crisis is double: the large number of retirees and life expectancy. In 2010, the 65-year-old group numbered about 34.6 million Americans. In 2024, about 11,000 people reached the retirement age a day, so until 2033 the number of eligible for the allowance is expected to be 66 million.

This demographic reality, which has been nicknamed “Sophie Tsunami”, will result in the year 2040, the pensioners will be 21.6% of the US population, about 81 million people. Every pensioner who receives Social Security, in 1960 the ratio was 1 to 5, until 1995 he fell to 1.3, and today is 1 to 2.8. From 2033 onwards – as the balances of the past have been scheduled – the funds will be taken that the employees are paying for Social Security.

In Israel, too, the picture is not pink: In an actuarial report he published last May, the Bank of Israel declared that the social insurance collapse was promoted in 8 years compared to the previous report, and is now expected to raid a leg in 2036.

A savings plan that many do not offer to employees

When founded in 1935 by President Franklin Roosevelt, US Social Security is intended to be a safety net and not the main source of life with respect in the years after work. Until the 1970s pension plans from the employers and allowances that paid a permanent traim in retirement were the standard in many workplaces in America. But over the years, these have fallen victim to demographics. In the 1950s, life expectancy was about 66.6 and a woman of 74 years. By 2015, life expectancy was jumped to a man to 76, and a woman to 81. This leap increased by more than 6 the number of years of pension payment to a man, and twice for a woman. This leap in liabilities have eliminated almost all pension funds.

In the early 1980s, there was, almost by chance, a new retirement savings program known as 401k, after the relevant clause in tax laws. The program allows the employee to secrete limited amounts (in 2024 a total of $ 23,000), for personal savings, while receiving various tax benefits. Usually these 401K plans are organized by the employer and managed by an external financial company. One of the biggest ones, the Abigail Johnson directed by Fidelic Foundation, runs $ 1.4 trillion in such programs.

Many employers also retrieve the above retirement plans (usually between 3-6 percent of wages). Do you know, the program is volunteer in all its components – both from the employer, the very organization of such a program and the willingness to set aside funds, and on the part of the employee, ie the mother and how much will set aside the program. Although there are several countries, such as California, in which laws have recently been required that require insurance-pension coverage, the general picture is clear: a minority of US workers secrete real sums of pensions.

A study from 2021 found that about 56% of US workers have no access to retirement savings plan, since employers do not offer it at all. Leading in the ranking is Florida, where almost 70% of employees have no access to such a program, followed by Georgia and Texas , Including about 60% of employees, is not offered.

The bottom line is clear: about 27% of people in America over the age of 59 do not have one dollar in savings for retirement, according to a survey by Credit Karma. And almost a third of the entire employees in the US do not have any pension savings.

Pension with liquid assets for less than $ 100,000

Venard is one of the biggest managers of America’s retirement programs, with more than $ 1 -to -dollar managed. Her new CEO, Salim Ramji, was appointed only last May. According to a report she published last year, as of the end of 2023, the median balance in the retirement account for ages 45-54, was $ 48,301, and aged 55-64 by $ 71,000. At 65 plus, the median balance was $ 70,620. From this it is clear how low these median balances are. The situation in the women is even more severe, as their accounts have been significantly smaller than men, while their life expectancy is much longer. According to a study by Bank of America, the balance of men’s retirement accounts were larger at the end of 2023 were 50% higher than those of women. At the boomers, this gap was about 87%.

Very large gaps in retirement are also held according to income groups, not only because the high payments have more free income and financial awareness, but that they usually work in the industries that offer savings plans for their employees, and even tend to add employer. These are high -tech companies, accountants and lawyer, banks, medical institutions. For example, the 50-75,000 group, ie, in the median wage area in America, has a median balance of about $ 32,000 in retirement savings. This compares with a median balance of 225,000 to a group earning $ 150,000 and above.

With such low balances in retirement accounts, most Americans’ pension does not seem promising. According to the annual study Protected RireMent Incom and Planning, 51% of those aged 65 liquid assets (of all types but without the residence) worth less than $ 100,000, about 25% of them liquid assets between 100,000 and 500,000, per 13% half a million to $ 1 million, and only 11% more.

Required savings: 10 times annual income

How much will the saver have to change retirement? According to Fidelti’s experts, savings are needed about 10 times the annual income at the age of 67 to finish life safely, ie before the savings are over. Another popular rule of thumb is known as the 4% rule, according to which the retiree will attract 4% of its savings and give balance each year, the fund will be enough for 30 years. This rule was built on discounts that include an equally divided portfolio between shares and bonds, and yielding returns like the past decades, in a similar inflationary environment.

Insertion of the American Household in 2024 was about $ 82,000 in 2024, and the median income of the National Insurance Household in retirement at $ 34,000. Even if we assume that a median household in retirement only requires 80% of that consumed up to that point, the gap is still translated by 4%, it will require that at the retirement date the savings balance will be $ 700,000 in this case. This amount is four times the actual severity of the median household. In practice, only about 20% of the public or in the coming decade there are amounts approaching or exceeding it. And this is even before laying a cut in allowances.

In view of all the above data, it will not be wonderful that many Americans do not feel confident in relation to their retirement change. In a survey conducted by Elainez Life, about 63% of the respondents were “more concerned that they will be dismissed when retirement than they feared to die.” By the way, the biggest concern was among those approaching retirement. At the age of 44-65 (generation X), about 71% more concerned that they would end money than they would end, compared to 53% of the Boomers generation (native 1946-1964) fearing such a script.

The figures come from two clear conclusions. The first is that all the high words and dramatic statements of Elon Musk on dramatic cuts in the budget and the federal deficit, nothing like that will occur, on the contrary: the deficit and debt will only increase. The reason is simple: All Federal government revenue tax does not already cover Social Security and adult medical insurance expenses, plus interest payments. The Federal Government budget is about $ 6.8 trillion this year, about 75% of which is locked in the law and cannot be cut without a deep cut in Social Security payments and precursor. Such reform has a slim chance of passing through Congress. In view of the fact that 50 plus people make up 52% ​​of voters, and which are 65 plus, 17.5% of the electo, and are also the highest participation group – over 71% of the polls. Given that the members of the House of Representatives have to be selected in less than two years in their selection areas, it is doubtful that most of them will vote for a dramatic cut in such a smooth income than their voters.

The second conclusion is that from now on, tens of millions of older Americans will become the poor. This will have a far-reaching political impact, while the only way to partially faced this bleak reality will be uploading ongoing taxes to reduce the huge wealth gaps that are already in the US today. Wealth will have fewer and fewer people. Without creative tools for the distribution of this new wealth, and in particular to use it to help adults who do not need their work, the popularity of the democratic party policy in relation to taxation and the distribution of wealth may grow at a rapid pace, which will surprise the entire political system.