Tuesday, April 8, 2014

Social Security bust

Is the US government going to keep its word to you, personally, regarding your old age pension and health care? Actuarial Study 120 plus the yearly Trustees Report from the Social Security/Medicare trustees are your keys to finding out.

Once you spend an hour or two figuring it out the first time, sorting out the yearly changes isn't too hard. But who spends those research hours? Virtually nobody, that's who. This is why I'm working on a report so you just sign up and every year get the answer based on the official numbers you've already paid to have compiled but aren't going to go out. If you'd like to sign up, say so in comments.

The basic information needed is pretty simple. What year were you born and what sex are you? Table 6 yields life expectancy figures based on sex and the summary in the Trustees Report for the latest year gives you the best guess on what year the funds run out of money and your payouts get reduced and by how much. Plug in your birth year and look it up in the right table and you're done.

According to the latest (2013) report Social Security goes belly up in 2033, 19 years from now. If you have a life expectancy of 19 or greater, you're going to have to save extra money to make up for the shortfall.

The government doesn't give up to date mortality tables for every year. They just give them for every 10 years and then projected mortality tables in the future. So you can look up the 2010 tables and the 2020 tables and blend them to get a slightly better figure. Excel is very good at this. It does occasionally make a difference.