Did you see this unbelievable front page news?
By Simon Black - August 17, 2017


Sovereign Valley Farm, Chile

A few weeks ago the Board of Trustees of Social Security sent a formal letter to the United States Senate and House of Representatives to issue a dire warning: Social Security is running out of money.

Given that tens of millions of Americans depend on this public pension program as their sole source of retirement income, you’d think this would have been front page news…

… and that every newspaper in the country would have reprinted this ominous projection out of a basic journalistic duty to keep the public informed about an issue that will affect nearly everyone.

But that didn’t happen.

The story was hardly picked up.

It’s astonishing how little attention this issue receives considering it will end up being one of the biggest financial crises in US history.

That’s not hyperbole either– the numbers are very clear.

The US government itself calculates that the long-term Social Security shortfall exceeds $46 TRILLION.

In other words, in order to be able to pay the benefits they’ve promised, Social Security needs a $46 trillion bailout.

Fat chance.

That amount is over TWICE the national debt, and nearly THREE times the size of the entire US economy.

Moreover, it’s nearly SIXTY times the size of the bailout that the banking system received back in 2008.

So this is a pretty big deal.

More importantly, even though the Social Security Trustees acknowledge that the fund is running out of money, their projections are still wildly optimistic.

In order to build their long-term financial models, Social Security’s administrators have to make certain assumptions about the future.

What will interest rates be in the future?
What will the population growth rate be?
How high (or low) will inflation be?

These variables can dramatically impact the outcome for Social Security.

For example, Social Security assumes that productivity growth in the US economy will average between 1.7% and 2% per year.

This is an important assumption: the faster US productivity grows, the faster the economy will grow. And this ultimately means more tax revenue (and more income) for the program.

But -actual- US productivity growth is WAY below their assumption.

Over the past ten years productivity growth has been about 25% below their expectations.

And in 2016 US productivity growth was actually NEGATIVE.

Here’s another one: Social Security is hoping for a fertility rate in the US of 2.2 children per woman.

This is important, because a higher population growth means more people entering the work force and paying in to the Social Security system.

But the actual fertility rate is nearly 20% lower than what they project.

And if course, the most important assumption for Social Security is interest rates.

100% of Social Security’s investment income is from their ownership of US government bonds.

So if interest rates are high, the program makes more money. If interest rates are low, the program doesn’t make money.

Where are interest rates now? Very low.

In fact, interest rates are still near the lowest levels they’ve been in US history.

Social Security hopes that ‘real’ interest rates, i.e. inflation-adjusted interest rates, will be at least 3.2%.

This means that they need interest rates to be 3.2% ABOVE the rate of inflation.

This is where their projections are WAY OFF… because real interest rates in the US are actually negative.

The 12-month US government bond currently yields 1.2%. Yet the official inflation rate in the Land of the Free is 1.7%.

In other words, the interest rate is LOWER than inflation, i.e. the ‘real’ interest rate is MINUS 0.5%.

Social Security is depending on +3.2%.

So their assumptions are totally wrong.

And it’s not just Social Security either.

According to the Center for Retirement Research at Boston College, US public pension funds at the state and local level are also underfunded by an average of 67.9%.

Additionally, most pension funds target an investment return of between 7.5% to 8% in order to stay solvent.

Yet in 2015 the average pension fund’s investment return was just 3.2%. And last year a pitiful 0.6%.

This is a nationwide problem. Social Security is running out of money. State and local pension funds are running out of money.

And even still their assumptions are wildly optimistic. So the problem is much worse than their already dismal forecasts.

Understandably everyone is preoccupied right now with whether or not World War III breaks out in Guam.

(I would respectfully admit that this is one of those times I am grateful to be living on a farm in the southern hemisphere.)

But long-term, these pension shortfalls are truly going to create an epic financial and social crisis.

It’s a ticking time bomb, and one with so much certainty that we can practically circle a date on a calendar for when it will hit.

There are solutions.

Waiting on politicians to fix the problem is not one of them.

The government does not have a spare $45 trillion lying around to re-fund Social Security.

So anyone who expects to retire with comfort and dignity is going to have to take matters into their own hands and start saving now.

Consider options like  SEP IRAs and 401(k) plans that have MUCH higher contribution limits, as well as self-directed structures which give you greater influence over how your retirement savings are invested.

These flexible structures also allow investments in alternative asset classes like private equity, cashflowing royalties, secured lending, cryptocurrency, etc.

Education is also critical.

Learning how to be a better investor can increase your investment returns and (most importantly) reduce losses.

And increasing the long-term average investment return of your IRA or 401(k) by just 1% per year can have a PROFOUND (six figure) impact on your retirement.

These solutions make sense: there is ZERO downside in saving more money for retirement.

But it’s critical to start now. A little bit of effort and planning right now will pay enormous dividends in the future.

Until tomorrow,

Simon Black


James Altucher: “Do NOT Buy Bitcoin Until You See This!”
I repeat… Do NOT buy Bitcoin before you see what I’m revealing here.

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  • Rosicrucian32

    For God’s sake this should be of no surprise to ANYONE who has been contributing to the system. This is why our politicians are not worth a shyte. They have been using the SS system as petty cash for DECADES robbing Peter to also rob Paul with NO INTENTION of paying anything back. THEY get pensions for the shoddy job they do. In fact the model of that corruption has been experienced in many major city’s civil servant pension funds. The criminal enterprises running the cities have been stealing from the Police Officers and Fire Fighters as well. These guys have to take reduced pensions and lose the health care they were promised before they even get a chance to retire. It is disgraceful what is happening on local and national levels. WE THE PEOPLE have to hold these elected officials accountable for the crimes they commit in the names of the CITIZENS that voted them into office. THEY WORK for US, they don’t rule us, they don’t look out for us. EVERYONE has to learn what LIBERTY really means, what FREEDOM really is. This SHYTE has to STOP!
    Their models of ideal reproduction don’t match up with their plans for immigration, illegal OR legal. In the USA standard citizenry exhibit reproduction at <1.5 per family (FAMILY???) where as low income entities (not FAMILIES) reproduce at a much higher rate, as well as immigrant populations reproducing at higher rates and no one is taking into the entitlements that Welcoming Cities, Lutheran Family Services and the other "charitable" relocation non-profits benefitting from federal funds supporting refugee influx efforts. We as a nation has been sitting on a house of cards for so long that many believe the tripe that the talking heads are selling.

    • Nikolai Lee

      What you are saying is that the collapse of the Western economies has little to do with economic or financial entities. What we are seeing is the collapse of moral values. “No man may serve two masters: for either he will hate the one and love the other, or else he will hold to the one and despise the other. No man can serve God and Mammon”. Remember? You’d better!

      • Rosicrucian32

        My faith is in God, ultimately He and only He has my destiny in his hands. I’m cool with that. He also has left me here to finish the job He has planned for me or He would have already called me home. We all have the power over our own actions, words, and reactions to the path of life and knowledge. If we do not like what the government is doing to us I will say so. I will also conduct myself honorably and honestly and I expect my elected officials to do the same. I am under no illusion that most are incapable of this, I don’t let it get me angry, I also will not let it go unchecked. I will do my part to enlighten my fellow citizens that the corruption lies on both sides of the aisle and at all levels.
        It all started with a decision (a bad one) about an apple.
        I remember………….

  • georgesilver

    “Social Security is running out of money. “
    Absolute rubbish!!!
    Just print some more money….. they’ve been doing it since 1913.
    What’s the problem?

  • Dimitri Ledkovsky

    Nice hustle DB! Was wondering what was being pitched. Held my breath to the end. Does this come naturally or did Simon Black have attend Wharton B. school to pull it off?

  • rsanchez1

    Of course they won’t cover it. Saving Social Security is one of Donald Trump’s central campaign promises, and if they did cover this story they would give Trump the opportunity to go out and tell everyone he can solve it by bringing in more money.

  • autonomous

    We have no way to know the actual rate of inflation. Whatever it is, it is at least greater than the tax rate–plus the deficit spending of the U.S. plus that of state and local governments including school districts and the deficit spending of all retirement plans.
    Increasing savings now is pissing in the wind without concurrent drastically cutting current spending, which will dry up investment income as well as wage income. The world has already arrived at the tailings of the giant Ponzi scheme that began with the industrial revolution.
    Will the human race disappear in a series of mushroom clouds? Probably–if we don’t die off of hunger. The sky is falling! the sky is falling!

  • Cat-astrophe

    If the government goes broke paying social security or…..any money you have saved in 401’s etc. will be used to bail in and buy a little time. Your savings are not yours, even those that are “protected” by “special” conditions.
    Think about it.

  • Praetor

    The Trustees going to Congress. Hey, we are going to have to dip into the Slush fund Congress, in the future. Ok. And they have been for purposes other than Social Security.

    What is Social Security anyway. It’s defiantly not a Pension. It is a Transfer from those that work to those who don’t, money comes in monthly or quarterly and goes out monthly or quarterly. The Social Security Trust Fund is the money that has been over collected, in other words the taxpayers were overtaxed. The only way continue SS in the future, is to increase productivity and pass the increased productivity on to those who made the increase and or cut the benefits.

    It’s a scam we all know it and we all know that people should really take care of themselves when they get old and be serious about. We all get old, no doubt.!!!

  • Goldcoaster

    where is the source for this information? no source no credibility.
    and will this guy ever learn to write using paragraphs instead of single sentences? its very annoying.

  • Goldcoaster

    6/22/2016 Page Content

    WASHINGTON – Today the Social Security and Medicare Boards of Trustees issued their annual financial review of the programs.

    Taken in combination, Social Security’s retirement and disability programs have dedicated resources sufficient to cover benefits for nearly two decades, until 2034. The Medicare Hospital Insurance Trust Fund will have sufficient funds to cover its
    obligations until 2028, two years earlier than was projected last year, but
    still 11 years later than was projected in the last report issued prior to passage of the Affordable Care Act.

  • JMiller

    Another silly article by Simon Black (Sovereign Man) in which he makes numerous mistakes. Simon Black says the US government itself calculates that the long-term Social Security shortfall exceeds $46 trillion. Simon Black is WRONG. The unfunded obligation through the infinite horizon is $34.2 trillion (Table VI.F1.) not $46 trillion.

    Simon Black makes the mistake by adding the unfunded obligation through the infinite horizon which is $34.2 trillion to the unfunded obligation through 2091 which totals $12.5 trillion. The $12.5 trillion unfunded obligation through 2091 is already part of the $34.2 trillion unfunded obligation through the infinite horizon.

    And the reason why this is not front page news is because it is common knowledge. Most people already know about the problems with Social Security.

    And of course Social Security does NOT require a bailout 60x greater than the 2008 emergency bank bailout. The 2008 bailout was not just $700 billion as Simon Black must think but almost $17 trillion. So Social Security needs a bailout 2x greater than the 2008 bailout.

    • paul

      I checked out what you said and you are correct JMiller.