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The complicated aspect about the Social Security system in the United States is that it was falsely marketed. It's called an "entitlement" because people pay into it and are supposed to get it back like a pension, regardless of whether they are rich or poor when they retire. And so the Baby Boomer generation views any cuts to their social security as a rugpull, basically. It's not insurance or charity; it's an entitlement. However, although it was marketed as like an entitlement/pension, that's not how the math worked out in practice. And it's because population growth is slowing. It was based on ponzi math, assuming that every generation will be bigger than the one that came before it. But the Baby Boomer generation was huge. In addition, when Social Security was created, the retirement age was set near the average life expectancy. Many people would not live long enough to collect it, and most would collect it for a handful of years. Only a small minority of outliers would work for like 40 years and then live off social security for like 20+ years. But then over the decades, life expectancy increased by like 15 years, so the default assumption is indeed that someone can work for 40 years and then have 20+ years of retirement, even though the amount they pay into it doesn't really mathematically cover that. It's not designed for that en masse. And so Baby Boomers had like a 3.5 worker-to-retiree ratio to support in their peak earnings years, while Millennials will have more like a 2.5 worker-to-retiree ratio or less to deal with. Which means they get a worse deal. Many Millennials don't even think they'll get it at all, despite paying into it. That breaks up the social contract and sets up inter-generational political conflict. "Fourth Turning" stuff. It's a big reason why "defined benefit" plans are inherently unstable; they rely on being able to predict the future. And it's also a big reason why, when speaking about deficits, nothing stops this train.

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Australia transitioned away from defined benefit schemes in the eighties and early nineties, and has increased retirement age (not a legal concept here, but when you can access a pension or your benefits) has been increasing too, from 55 when I was young to 67 currently. I'm not a huge fan of the resulting system in its details, but it's a sign that people and politicians used to care about longer-term thinking. (Interestingly, these reforms were from the Left, not Right, which maybe explains why they happened?).
↩ replying to Rusty Russell
Australia has 2 schemes. The aged pension & superannuation. The pension is a welfare payment calculated based on your income & assets one you hit 67. Superannuation is different in that it is your money held in trust until you reach preservation age (60 for most Australians). Each Australian employee is forced to pay 11% of their gross income into a superannuation fund. The trouble with superannuation funds is that they are subject to the same aging demographic problem. Most funds invest in equities, CRE & bonds. As our population ages and consumes from these funds, the investments don't benefit from the forced saving as much. It becomes another ponzi only it's felt in declining superannuation "yields". The saving grace in our system is that you can set up your own superannuation trust/fund & manage the investing yourself. My self managed fund is very heavily invested in Bitcoin which has performed quite well over the last 4 years. Currently none of the managed funds offer exposure to Bitcoin.
↩ replying to Brisket
The fundamental difference is between defined benefit (pension scheme) and defined contribution (super). The latter *is* thought of as an entitlement, but the separate accounting makes that closer to the truth? Ofc, poor overall economic performance will hurt super (in Australia, this means if property prices ever go down, we're screwed). I suspect the govt will raid the outliers during some crisis ("who needs $10m of super?" they will cry) probably using exit taxation. This political risk from here to my retirement is significant, which is why I've never topped up mine.
↩ replying to Rusty Russell
Agreed. I've never contributed more than I was compelled to because of this. I was so disillusioned by the whole scheme that I set up a SMSF and dumped it into Bitcoin before I'd built up much conviction in Bitcoin. The biggest drawcard for me was being able to custody the asset. With hindsight, it worked out well for me. They're already seeking to tax unrealised gains on superannuation balanced over $3m AUD (Division 296). That $3m figure is not even indexed to CPI, so you can imagine how many will be effected by it over the years.
"And so Baby Boomers had like a 3.5 worker-to-retiree ratio to support in their peak earnings years, while Millennials will have more like a 2.5 worker-to-retiree ratio or less to deal with. " // I certainly vividly remember how, in our later high school years, during the "Social Studies" class, we were presented with very similar formulas for the German social security system. The math simply did not seem to check out. It just didn't make sense "what the adults were trying to tell us". It did not square. When a few of us inquired about it, the teacher didn’t have any satisfying answers. (Well, duh—he’d been on the Ponzi train long enough to know that it would work out for *him* as long as a sufficient number of people kept paying into the system for the next 20-30 years.) We were presented with all these rosy words and theories about how great Germany is because "everybody is taken care of." But when you looked at the cold, hard numbers, it seemed evident that a cold, hard stop would follow - and that our generation would bear the brunt. That specific day never got out of my head. A severe seed of doubt had been planted.
↩ replying to npub10zxa...8gga
Its ~ 2:1 currently in Germany w/o consideration that 100 billion euro are subsidized from taxes (or should we say abused) on top, otherwise it would look even more worse….
Demografieportal - Fakten - Beitragszahler je Altersrentner in der gesetzlichen Rentenversicherung
Aktuell stehen einem Altersrentner rund zwei Beitragszahler gegenüber. Anfang der 1960er Jahre kamen auf einen Altersrentner noch sechs aktiv vers...
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The Fourth Turning is here. Prepare for the impact. #siamstr
Lyn Alden's avatar Lyn Alden
The complicated aspect about the Social Security system in the United States is that it was falsely marketed. It's called an "entitlement" because people pay into it and are supposed to get it back like a pension, regardless of whether they are rich or poor when they retire. And so the Baby Boomer generation views any cuts to their social security as a rugpull, basically. It's not insurance or charity; it's an entitlement. However, although it was marketed as like an entitlement/pension, that's not how the math worked out in practice. And it's because population growth is slowing. It was based on ponzi math, assuming that every generation will be bigger than the one that came before it. But the Baby Boomer generation was huge. In addition, when Social Security was created, the retirement age was set near the average life expectancy. Many people would not live long enough to collect it, and most would collect it for a handful of years. Only a small minority of outliers would work for like 40 years and then live off social security for like 20+ years. But then over the decades, life expectancy increased by like 15 years, so the default assumption is indeed that someone can work for 40 years and then have 20+ years of retirement, even though the amount they pay into it doesn't really mathematically cover that. It's not designed for that en masse. And so Baby Boomers had like a 3.5 worker-to-retiree ratio to support in their peak earnings years, while Millennials will have more like a 2.5 worker-to-retiree ratio or less to deal with. Which means they get a worse deal. Many Millennials don't even think they'll get it at all, despite paying into it. That breaks up the social contract and sets up inter-generational political conflict. "Fourth Turning" stuff. It's a big reason why "defined benefit" plans are inherently unstable; they rely on being able to predict the future. And it's also a big reason why, when speaking about deficits, nothing stops this train.
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In Switzerland, all citizens can vote on specific issues, and this year, pensions were a major topic, especially because everything has become more expensive due to inflation. We even voted to introduce a 13th monthly pension payment, although the financing for it has not yet been finalized. Since young people don't always vote and there are more older people, the older population is more likely to achieve a majority.
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Where I’m from, when millennials mention they don’t expect to ever get any pension from their mandatory payemnts into the system, the older generations mostly agree that it doesn’t look great, but their answer is that we now have this extra gov-run fund where you can invest additional money into your own retirement with a tiny tax deduction incentive. And I ask if they have ever looked up their portfolio and they look at me funny when I say why would I pay into a fund that will buy local government and government-owned businesses’ bonds with this money and tell me it’s all taken care of. It’s a great plan to distribute government debt, but not a great retirement plan. That part hasn’t sunk in yet.
this is why I view my humble stacking of BTC as a future pension of sorts. I can imagine the gov will keep jacking up the pension age anyway and the reality is most people are barley physically or mentality capable for 9-6 jobs past 55 and even then good luck getting a job (I'm talking avout normal people here , not doctors , programmers)
they will just print more pieces of paper and then they'll hand them to the old people old people vote 30 years ago I thought it was insolving and I really didn't think I was ever going to get any but now I'm 60 I think I might get a little bit they will means test it. tax it .AMT it it won't be enough eventually it will fail somehow probably through too much inflation
They implemented that in Germany after WW2. It simply doesn't work, but opting out is unnecessarily difficult or even impossible if you don't want to leave the country. Best advice here is to forget about it and invest in your own retirement plan. Which is taxed and they have plans to charge you for social security on your earnings 😂 Yes, the system is screwed.
Lyn Alden's avatar Lyn Alden
The complicated aspect about the Social Security system in the United States is that it was falsely marketed. It's called an "entitlement" because people pay into it and are supposed to get it back like a pension, regardless of whether they are rich or poor when they retire. And so the Baby Boomer generation views any cuts to their social security as a rugpull, basically. It's not insurance or charity; it's an entitlement. However, although it was marketed as like an entitlement/pension, that's not how the math worked out in practice. And it's because population growth is slowing. It was based on ponzi math, assuming that every generation will be bigger than the one that came before it. But the Baby Boomer generation was huge. In addition, when Social Security was created, the retirement age was set near the average life expectancy. Many people would not live long enough to collect it, and most would collect it for a handful of years. Only a small minority of outliers would work for like 40 years and then live off social security for like 20+ years. But then over the decades, life expectancy increased by like 15 years, so the default assumption is indeed that someone can work for 40 years and then have 20+ years of retirement, even though the amount they pay into it doesn't really mathematically cover that. It's not designed for that en masse. And so Baby Boomers had like a 3.5 worker-to-retiree ratio to support in their peak earnings years, while Millennials will have more like a 2.5 worker-to-retiree ratio or less to deal with. Which means they get a worse deal. Many Millennials don't even think they'll get it at all, despite paying into it. That breaks up the social contract and sets up inter-generational political conflict. "Fourth Turning" stuff. It's a big reason why "defined benefit" plans are inherently unstable; they rely on being able to predict the future. And it's also a big reason why, when speaking about deficits, nothing stops this train.
View quoted note →
You've 100% missed the problem Lyn (sorry). If the funds contributed to Social Security had been PROPERLY managed and invested, the system would work. It's simply actuarial math...and yes it should be adjusted periodically (again if it had been properly managed) but that's just part of the process. Any well-managed insurance plan does this every day. Government is the problem, and government mismanagement is why Social Security is in trouble. (Think of it this way - what if the Social Security funds were invested the same way Nancy Pelosi invested her own money...)
Awesome write up.
Lyn Alden's avatar Lyn Alden
The complicated aspect about the Social Security system in the United States is that it was falsely marketed. It's called an "entitlement" because people pay into it and are supposed to get it back like a pension, regardless of whether they are rich or poor when they retire. And so the Baby Boomer generation views any cuts to their social security as a rugpull, basically. It's not insurance or charity; it's an entitlement. However, although it was marketed as like an entitlement/pension, that's not how the math worked out in practice. And it's because population growth is slowing. It was based on ponzi math, assuming that every generation will be bigger than the one that came before it. But the Baby Boomer generation was huge. In addition, when Social Security was created, the retirement age was set near the average life expectancy. Many people would not live long enough to collect it, and most would collect it for a handful of years. Only a small minority of outliers would work for like 40 years and then live off social security for like 20+ years. But then over the decades, life expectancy increased by like 15 years, so the default assumption is indeed that someone can work for 40 years and then have 20+ years of retirement, even though the amount they pay into it doesn't really mathematically cover that. It's not designed for that en masse. And so Baby Boomers had like a 3.5 worker-to-retiree ratio to support in their peak earnings years, while Millennials will have more like a 2.5 worker-to-retiree ratio or less to deal with. Which means they get a worse deal. Many Millennials don't even think they'll get it at all, despite paying into it. That breaks up the social contract and sets up inter-generational political conflict. "Fourth Turning" stuff. It's a big reason why "defined benefit" plans are inherently unstable; they rely on being able to predict the future. And it's also a big reason why, when speaking about deficits, nothing stops this train.
View quoted note →
The root problem here is that nowhere near enough young people vote. If they did, they'd still be able to sway the vote enough to cut spending on the elderly. But because they mostly don't vote, they're going to get screwed. Frankly, they collectively deserve to get screwed. Inaction has consequences.
Lyn Alden's avatar Lyn Alden
The complicated aspect about the Social Security system in the United States is that it was falsely marketed. It's called an "entitlement" because people pay into it and are supposed to get it back like a pension, regardless of whether they are rich or poor when they retire. And so the Baby Boomer generation views any cuts to their social security as a rugpull, basically. It's not insurance or charity; it's an entitlement. However, although it was marketed as like an entitlement/pension, that's not how the math worked out in practice. And it's because population growth is slowing. It was based on ponzi math, assuming that every generation will be bigger than the one that came before it. But the Baby Boomer generation was huge. In addition, when Social Security was created, the retirement age was set near the average life expectancy. Many people would not live long enough to collect it, and most would collect it for a handful of years. Only a small minority of outliers would work for like 40 years and then live off social security for like 20+ years. But then over the decades, life expectancy increased by like 15 years, so the default assumption is indeed that someone can work for 40 years and then have 20+ years of retirement, even though the amount they pay into it doesn't really mathematically cover that. It's not designed for that en masse. And so Baby Boomers had like a 3.5 worker-to-retiree ratio to support in their peak earnings years, while Millennials will have more like a 2.5 worker-to-retiree ratio or less to deal with. Which means they get a worse deal. Many Millennials don't even think they'll get it at all, despite paying into it. That breaks up the social contract and sets up inter-generational political conflict. "Fourth Turning" stuff. It's a big reason why "defined benefit" plans are inherently unstable; they rely on being able to predict the future. And it's also a big reason why, when speaking about deficits, nothing stops this train.
View quoted note →
↩ replying to Creediator
Most people didn't used to live beyond the age where they were able to work. Now the majority do. A potential solution is having a cultural shift away from debt fueled consumerism towards frugality and saving. Hopefully, this will be encouraged by the widespread adoption of Bitcoin and HODL mentality. The other way is having a cultural expectation for children to take care of their aging parents, definitely not an easy sell in the West nowadays. Either way, can't be fixed quickly nor easily.
Would appreciate your thoughts on real estate in the context of the value that the Baby Boomers will inevitably pass on to their kids. While they may have deprived the younger generations of home-ownership and the future value of “entitlements,” bricks and mortar might be their most meaningful asset transfer. Is this just an 80 IQ take or is this actually an under-appreciated demographic shift that bears exploring?
Social security is a huge Cantillon scam. The govt and their fascist cronyies on wall st get your money today at full value and give it back to you as inflated , devalued money sometime in the future. They throw you some bones from interest and investment returns, but the big returns go to Wall St. Anyone relying on Social Security when they retire is screwed.
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Ok so hear me out... Instead of requiring that employees pay into Social Security, the State requires that this amount be converted into bitcoin sent to a time-locked address that YOU hold the keys to, that is locked until whatever the "retirement age" was when you started employment. Different potential timelock per new employer. Each employer pays to a different address all derived from a single xpub. If the State really cares about forcing people to save for retirement, this is a much more efficient model and you always hold the keys to your own saved money; no opportunity for it to be rehypothecated, redistributed, or spent by the State, and you get exactly what you were forced to save. Note: Not an endorsement of State force.