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Social Security Is Worth More Than You Think, but Needs Your Help Social Security Is Worth More Than You Think, but Needs Your Help
(10 days later)
The stock market has been erratic, real estate is hurting, bond yields are painfully low and dividends are shrinking. In the coronavirus recession, most financial assets have been disturbingly volatile.The stock market has been erratic, real estate is hurting, bond yields are painfully low and dividends are shrinking. In the coronavirus recession, most financial assets have been disturbingly volatile.
But one widely held financial asset, perhaps the most important one for the vast majority of Americans, has performed splendidly: their stake in Social Security.But one widely held financial asset, perhaps the most important one for the vast majority of Americans, has performed splendidly: their stake in Social Security.
It hasn’t merely been a solid support for millions of people in a difficult time. While the income-producing power of so many other assets has been sapped by economic weakness and low interest rates, Social Security payments have held steady. And thanks to those rock-bottom interest rates, the market value of the Social Security income stream has soared in a measurable way.It hasn’t merely been a solid support for millions of people in a difficult time. While the income-producing power of so many other assets has been sapped by economic weakness and low interest rates, Social Security payments have held steady. And thanks to those rock-bottom interest rates, the market value of the Social Security income stream has soared in a measurable way.
You may not think of Social Security as a personal asset, like a bank account, a portfolio of stocks and bonds or a house. But Social Security retirement benefits are a kind of annuity, as I’ll explain, and annuities have a definite market value. Considered this way, Social Security’s value has been rising. Even if you aren’t receiving payments now, you have a stake in the asset, and it is in your interest to protect it.You may not think of Social Security as a personal asset, like a bank account, a portfolio of stocks and bonds or a house. But Social Security retirement benefits are a kind of annuity, as I’ll explain, and annuities have a definite market value. Considered this way, Social Security’s value has been rising. Even if you aren’t receiving payments now, you have a stake in the asset, and it is in your interest to protect it.
“The most important financial asset for most Americans by far is Social Security,” said William J. Bernstein, a financial adviser and author on financial subjects. “We are in a retirement crisis, and the only foreseeable answer is Social Security.”“The most important financial asset for most Americans by far is Social Security,” said William J. Bernstein, a financial adviser and author on financial subjects. “We are in a retirement crisis, and the only foreseeable answer is Social Security.”
Perhaps if more people understood the impressive, countercyclical performance of their share in Social Security, there would be more clamor to protect it. But critical as the benefits are proving to be in this crisis, as in so many others, the entire Social Security system faces a cash shortfall down the road, and it needs help from Congress. The pandemic has complicated these long-term issues, which can be resolved only in Washington.Perhaps if more people understood the impressive, countercyclical performance of their share in Social Security, there would be more clamor to protect it. But critical as the benefits are proving to be in this crisis, as in so many others, the entire Social Security system faces a cash shortfall down the road, and it needs help from Congress. The pandemic has complicated these long-term issues, which can be resolved only in Washington.
First, consider the good news.First, consider the good news.
In the coronavirus crisis, Social Security has succeeded in doing just what it was designed to do: keeping old people, disabled people and their dependents out of dire poverty, and providing a retirement cushion for nearly everyone else.In the coronavirus crisis, Social Security has succeeded in doing just what it was designed to do: keeping old people, disabled people and their dependents out of dire poverty, and providing a retirement cushion for nearly everyone else.
About 178 million working people of all ages are covered by Social Security, government statistics show. Even if those people are not eligible for benefits now, they will be entitled to them later. Plenty of people are already getting them, however: About 65 million Americans will receive more than $1 trillion this year. That includes nine out of 10 of those 65 and older, as well as millions of disabled people, dependents and survivors.About 178 million working people of all ages are covered by Social Security, government statistics show. Even if those people are not eligible for benefits now, they will be entitled to them later. Plenty of people are already getting them, however: About 65 million Americans will receive more than $1 trillion this year. That includes nine out of 10 of those 65 and older, as well as millions of disabled people, dependents and survivors.
With more than 100,000 Covid-19 deaths in America and millions of people financially desperate, a program that supplies regular income to so many can surely be said to be more valuable than ever.With more than 100,000 Covid-19 deaths in America and millions of people financially desperate, a program that supplies regular income to so many can surely be said to be more valuable than ever.
But I concede that is a subjective judgment. The program has also risen in value in a measurable way that may not be intuitively obvious.But I concede that is a subjective judgment. The program has also risen in value in a measurable way that may not be intuitively obvious.
This is a little wonky, so bear with me.This is a little wonky, so bear with me.
Financial markets put a price on almost everything, and they can provide an approximate cash value for Social Security, too.Financial markets put a price on almost everything, and they can provide an approximate cash value for Social Security, too.
Your benefits, now or in the future, accrue gradually, over years of work and paying taxes into the Social Security system. But as I pointed out recently, low interest rates have reduced bond yields and made commercial annuities extremely expensive.Your benefits, now or in the future, accrue gradually, over years of work and paying taxes into the Social Security system. But as I pointed out recently, low interest rates have reduced bond yields and made commercial annuities extremely expensive.
With the help of Dale Kintzel, a former Social Security economist who studied its pricing in a 2017 paper, I’ve checked the market values of annuities and compared them with Social Security.With the help of Dale Kintzel, a former Social Security economist who studied its pricing in a 2017 paper, I’ve checked the market values of annuities and compared them with Social Security.
Those federal retirement benefits are essentially annuities: bonds wrapped in insurance.Those federal retirement benefits are essentially annuities: bonds wrapped in insurance.
So-called single-premium immediate annuities — in which an insurance company will provide you with income, in exchange for a sum of cash — can’t do everything Social Security does, but they come close. Mr. Kintzel has used annuities to approximate the cash value of Social Security benefits. Those values are startlingly high.So-called single-premium immediate annuities — in which an insurance company will provide you with income, in exchange for a sum of cash — can’t do everything Social Security does, but they come close. Mr. Kintzel has used annuities to approximate the cash value of Social Security benefits. Those values are startlingly high.
Mr. Kintzel found that for the average 65-year-old man, who last year received a retirement benefit of $1,375 a month, an annuity supplying that lifetime cash flow would cost at least $459,866 — 13 percent more than a comparable annuity in 2014.Mr. Kintzel found that for the average 65-year-old man, who last year received a retirement benefit of $1,375 a month, an annuity supplying that lifetime cash flow would cost at least $459,866 — 13 percent more than a comparable annuity in 2014.
For a 65-year-old woman, the average monthly benefit was $1,102 last year. A comparable commercial annuity, Mr. Kintzel said, would cost $368,562.For a 65-year-old woman, the average monthly benefit was $1,102 last year. A comparable commercial annuity, Mr. Kintzel said, would cost $368,562.
These figures are based on data from immediateannuities.com, which tracks annuity prices.These figures are based on data from immediateannuities.com, which tracks annuity prices.
These are just average amounts and would be much bigger — perhaps as much as $1 million — for high-income people who delay claiming benefits until they are 70, my own calculations suggest.These are just average amounts and would be much bigger — perhaps as much as $1 million — for high-income people who delay claiming benefits until they are 70, my own calculations suggest.
Updated July 7, 2020
The coronavirus can stay aloft for hours in tiny droplets in stagnant air, infecting people as they inhale, mounting scientific evidence suggests. This risk is highest in crowded indoor spaces with poor ventilation, and may help explain super-spreading events reported in meatpacking plants, churches and restaurants. It’s unclear how often the virus is spread via these tiny droplets, or aerosols, compared with larger droplets that are expelled when a sick person coughs or sneezes, or transmitted through contact with contaminated surfaces, said Linsey Marr, an aerosol expert at Virginia Tech. Aerosols are released even when a person without symptoms exhales, talks or sings, according to Dr. Marr and more than 200 other experts, who have outlined the evidence in an open letter to the World Health Organization.
Common symptoms include fever, a dry cough, fatigue and difficulty breathing or shortness of breath. Some of these symptoms overlap with those of the flu, making detection difficult, but runny noses and stuffy sinuses are less common. The C.D.C. has also added chills, muscle pain, sore throat, headache and a new loss of the sense of taste or smell as symptoms to look out for. Most people fall ill five to seven days after exposure, but symptoms may appear in as few as two days or as many as 14 days.
Scientists around the country have tried to identify everyday materials that do a good job of filtering microscopic particles. In recent tests, HEPA furnace filters scored high, as did vacuum cleaner bags, fabric similar to flannel pajamas and those of 600-count pillowcases. Other materials tested included layered coffee filters and scarves and bandannas. These scored lower, but still captured a small percentage of particles.
A commentary published this month on the website of the British Journal of Sports Medicine points out that covering your face during exercise “comes with issues of potential breathing restriction and discomfort” and requires “balancing benefits versus possible adverse events.” Masks do alter exercise, says Cedric X. Bryant, the president and chief science officer of the American Council on Exercise, a nonprofit organization that funds exercise research and certifies fitness professionals. “In my personal experience,” he says, “heart rates are higher at the same relative intensity when you wear a mask.” Some people also could experience lightheadedness during familiar workouts while masked, says Len Kravitz, a professor of exercise science at the University of New Mexico.
The steroid, dexamethasone, is the first treatment shown to reduce mortality in severely ill patients, according to scientists in Britain. The drug appears to reduce inflammation caused by the immune system, protecting the tissues. In the study, dexamethasone reduced deaths of patients on ventilators by one-third, and deaths of patients on oxygen by one-fifth.
The coronavirus emergency relief package gives many American workers paid leave if they need to take time off because of the virus. It gives qualified workers two weeks of paid sick leave if they are ill, quarantined or seeking diagnosis or preventive care for coronavirus, or if they are caring for sick family members. It gives 12 weeks of paid leave to people caring for children whose schools are closed or whose child care provider is unavailable because of the coronavirus. It is the first time the United States has had widespread federally mandated paid leave, and includes people who don’t typically get such benefits, like part-time and gig economy workers. But the measure excludes at least half of private-sector workers, including those at the country’s largest employers, and gives small employers significant leeway to deny leave.
So far, the evidence seems to show it does. A widely cited paper published in April suggests that people are most infectious about two days before the onset of coronavirus symptoms and estimated that 44 percent of new infections were a result of transmission from people who were not yet showing symptoms. Recently, a top expert at the World Health Organization stated that transmission of the coronavirus by people who did not have symptoms was “very rare,” but she later walked back that statement.
Touching contaminated objects and then infecting ourselves with the germs is not typically how the virus spreads. But it can happen. A number of studies of flu, rhinovirus, coronavirus and other microbes have shown that respiratory illnesses, including the new coronavirus, can spread by touching contaminated surfaces, particularly in places like day care centers, offices and hospitals. But a long chain of events has to happen for the disease to spread that way. The best way to protect yourself from coronavirus — whether it’s surface transmission or close human contact — is still social distancing, washing your hands, not touching your face and wearing masks.
A study by European scientists is the first to document a strong statistical link between genetic variations and Covid-19, the illness caused by the coronavirus. Having Type A blood was linked to a 50 percent increase in the likelihood that a patient would need to get oxygen or to go on a ventilator, according to the new study.
If air travel is unavoidable, there are some steps you can take to protect yourself. Most important: Wash your hands often, and stop touching your face. If possible, choose a window seat. A study from Emory University found that during flu season, the safest place to sit on a plane is by a window, as people sitting in window seats had less contact with potentially sick people. Disinfect hard surfaces. When you get to your seat and your hands are clean, use disinfecting wipes to clean the hard surfaces at your seat like the head and arm rest, the seatbelt buckle, the remote, screen, seat back pocket and the tray table. If the seat is hard and nonporous or leather or pleather, you can wipe that down, too. (Using wipes on upholstered seats could lead to a wet seat and spreading of germs rather than killing them.)
If you’ve been exposed to the coronavirus or think you have, and have a fever or symptoms like a cough or difficulty breathing, call a doctor. They should give you advice on whether you should be tested, how to get tested, and how to seek medical treatment without potentially infecting or exposing others.
Note that all of these estimates understate the value of Social Security, which provides disability benefits and supplemental income in addition to basic retirement benefits. And these estimates don’t take into account the effects of the further decline in interest rates since the beginning of this year, which have reduced income streams from many assets, but not for Social Security.Note that all of these estimates understate the value of Social Security, which provides disability benefits and supplemental income in addition to basic retirement benefits. And these estimates don’t take into account the effects of the further decline in interest rates since the beginning of this year, which have reduced income streams from many assets, but not for Social Security.
Perhaps the best thing about Social Security is that unlike a stock portfolio, it can be counted on, Mr. Kintzel said. “It is backed by the government, and so it’s virtually risk-free, or it should be. I’ve always thought that Social Security is one thing that everybody can agree on. It’s a good thing.”Perhaps the best thing about Social Security is that unlike a stock portfolio, it can be counted on, Mr. Kintzel said. “It is backed by the government, and so it’s virtually risk-free, or it should be. I’ve always thought that Social Security is one thing that everybody can agree on. It’s a good thing.”
Yet Social Security continues to have an odd problem. Although its stability has been among its greatest virtues, it remains underfunded.Yet Social Security continues to have an odd problem. Although its stability has been among its greatest virtues, it remains underfunded.
I pointed out a year ago that Social Security benefit payouts were greater than the system’s revenues. That is still true. To receive all of the benefits you have been promised, a reluctant Congress will need to fix Social Security, which is likely to dip into the principal of its trust funds for the first time this year. Interest payments from the trust funds have made up the gap, allowing full benefits until now.I pointed out a year ago that Social Security benefit payouts were greater than the system’s revenues. That is still true. To receive all of the benefits you have been promised, a reluctant Congress will need to fix Social Security, which is likely to dip into the principal of its trust funds for the first time this year. Interest payments from the trust funds have made up the gap, allowing full benefits until now.
Without help from Congress, these trust funds, are likely to be exhausted within 15 years — and perhaps sooner. If that were to happen, benefits would be cut, perhaps to 79 percent of the promised levels, Social Security estimates.Without help from Congress, these trust funds, are likely to be exhausted within 15 years — and perhaps sooner. If that were to happen, benefits would be cut, perhaps to 79 percent of the promised levels, Social Security estimates.
In an online conference in late April, Stephen C. Goss, Social Security’s chief actuary, said that the current recession would almost certainly reduce the system’s payroll tax receipts and could lead to trust fund depletion by 2033 or even sooner. Precise estimates are impossible now, with the economy shrinking so rapidly, he said. “All bets are off, and we will just have to see what happens, because we really don’t know whether we’ll be back to normal,” Mr. Goss said.In an online conference in late April, Stephen C. Goss, Social Security’s chief actuary, said that the current recession would almost certainly reduce the system’s payroll tax receipts and could lead to trust fund depletion by 2033 or even sooner. Precise estimates are impossible now, with the economy shrinking so rapidly, he said. “All bets are off, and we will just have to see what happens, because we really don’t know whether we’ll be back to normal,” Mr. Goss said.
As a matter of basic math, Social Security needs more revenue or lower expenses. But I think this recession suggests that increasing revenue is the way to go, because Social Security benefits have been so crucial. If they were to be cut, even bigger rescue programs would be needed from other sources. Far better to maintain and improve Social Security, which works automatically and well.As a matter of basic math, Social Security needs more revenue or lower expenses. But I think this recession suggests that increasing revenue is the way to go, because Social Security benefits have been so crucial. If they were to be cut, even bigger rescue programs would be needed from other sources. Far better to maintain and improve Social Security, which works automatically and well.
Last year, I said that the most important thing you could probably do to improve your personal finances was to make sure that Congress took action to bolster the program’s funding. That’s even truer today, when its benefits are more valuable, and more badly needed.Last year, I said that the most important thing you could probably do to improve your personal finances was to make sure that Congress took action to bolster the program’s funding. That’s even truer today, when its benefits are more valuable, and more badly needed.