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Health & Fitness

Social Insecurity

The Argyle Capital Partners blog is meant to bring a bit of levity and humor to the world of financial services.

In 1935, when Social Security was founded, the United States was in the middle of the Great Depression and the average life expectancy was 60 for males and 64 for females.*  Ironically, the average retirement age in 1935 was 65, so the Government’s odds at fulfilling their obligations were even better than a casino’s.


Today Social Security makes up 20.8% of Uncle Sam’s annual budget as folks are living longer (the average is now above 80) but the average retirement age hasn’t budged.  Our public pension plan is having to work harder than Dr. Drew when Charlie Sheen checks in at Celebrity Rehab.


Plus, the number of companies offering private pension plans as part of their retirement package today is insignificant.  The gap between what retirees need to live out their remaining years and the resources available to do so is widening each year.  Did you know that one of our government’s creditors is actually the Social Security Trust?  We are borrowing from ourselves to make ends meet. Literally.

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Should we require people to work until they are 75 or 80?  Allow people to retire at 70 but then cut them off from their benefits at 85 or 90?  Host a lottery to decide which people are eligible to receive their heart medications?  Now we are getting into the Medicare/Medicaid discussion which makes up another 20.1% of our budget.  Hence, the strain on our system and extremely sensitive nature of ongoing debates in Washington.


So, what’s the solution?

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I don’t know.  But what I do know is that there is currently $2.5 trillion sitting in virtually defunct securities (Treasury Notes) earning “a market rate of interest” whose sole purpose is to fund this entire operation.  An excerpt from the most recent Social Security Administration Trustees Report:


“The only disbursements permitted from the funds are administrative costs and benefit payments. Federal law requires that all excess funds be invested in interest-bearing securities backed by the full faith and credit of the United States. The Department of the Treasury currently invests all program revenues in special non-marketable securities of the U.S. Government which earn a market rate of interest.”


Is it still in the best interest of our entire population for Social Security Trust funds to be managed in this manner?  What happens when the only securities that meet the criteria “backed by the full faith and credit of the United States” AND “earning a market rate of interest” no longer allow the fund to meet its objectives?  What if a fraction of the Trust’s assets were placed into dividend-paying, large cap stocks?**  For instance, 40% of $2.5 trillion is a trillion dollars – that would undoubtedly benefit the stock market (and 401k plans), our economy as a whole, and potentially the future solvency of the Social Security Administration, all while maintaining, if not increasing, the level of interest being paid to the Trust.


Could we actually implement this plan?  


Theoretically, yes.  Will it happen?  Dubious.  But it’s interesting to think about….


* The adjective “great” which is often used to describe our country’s economic depression from 1929 to 1941 (or so) can be misleading. From what I’ve heard it was actually quite terrible.

** This is neither allowed nor being discussed by anyone having the authority to make such decisions.


Have a great week!!


Adam B. Scott
Argyle Capital Partners, LLC
www.argylecapitalpartners.com
10100 Santa Monica Blvd, #300
Los Angeles, CA 90067
(310) 772-2001 

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