Social Security, like America’s trillions of dollars of underfunded public and private pensions, is nothing more than a ponzi scheme that will eventually fail. Any system that relies on capital drawdowns to fund benefit obligations while the number of beneficiaries continues to soar is, by definition, a rather obvious ponzi. That said, it’s always easier to ‘kick the can down the road’ and hope for the best than to preemptively address the real problems that face retirees…after all, old people love to vote and taking away their retirement money is not a good way to earn their support.
Ironically, it’s not just the lower tiers of the socio-economic spectrum that will bankrupt social security. As a new study entitled “How the Growing Gap in Life Expectancy May Affect Retirement Benefits and Reforms” points out, rich people are living a lot longer than they used to and it’s going to take a massive toll on government entitlement programs over the next couple of decades.
Per the chart below from Bloomberg, a “rich” 50-year-old in 2010 can expect to live 12.7 years longer than someone in the lowest income bracket.
Converting those longer life expectancies into dollars implies that people in the highest income brackets will draw $66,000 more from Social Security than the previous generation of retirees. Moreover, using current distribution rates and adjusted for longevity, a top-earner could expect to extract nearly $300,000 from Social Security over a lifetime compared to $122,000 for the bottom income bracket.
Combined with other entitlements like medicare, the longevity penalty on young taxpayers is even more pronounced.
Of course, these entitlement programs should completely collapse at some point over the next couple of decades leaving young folks high and dry. But, luckily the average millennial has stashed away like $1,000…which, when compounded at 7% for 40 years, should be enough to cover 2-3 months of rent, at least.