By: Russ Kamp, Managing Director, Ryan ALM, Inc.

I will produce another blog post on Social Security in October when the official COLA is announced. Currently, estimates are targeting an increase of roughly 2.6% for 2025 benefits. That is truly unfortunate because “Sticky” and “Core Sticky” inflation are far outpacing the likely 2.6% adjustment. Furthermore, the “Common Man” inflation rate is still in excess of 4%. This metric measures the inflation associated with “staples” and not discretionary items.

I’m bringing this to your attention today because of a note that I read in the Glen Eagle trading “Market Moment”, which I very much enjoy getting on a roughly weekly basis. In today’s email, they mentioned that “nearly half of workers plan to claim Social Security benefits before reaching full eligibility due to fears of the program running out of money or needing funds. The most popular ages to file are 65 (23%) and 62 (12%). Only 10% plan to wait until age 70 to receive the maximum benefit.” That is truly unfortunate. Most Americans have been told that Social Security is running out of money. In fact, they are warned that the end is coming soon. What a bunch of baloney. There are many reasons why folks choose to take this important benefit prematurely, but it should not occur because one feels that the SS “fund” will dry up.

As I’ve reported in previous blog posts, it is a fallacy to believe that there exists an “operational constraint on the government’s ability to meet all Social Security payments in a timely manner. It doesn’t matter what the numbers are in the Social Security Trust Fund account, because the trust fund is nothing more than record-keeping, as are all accounts at the Fed.” (Warren Mosler, “Seven Deadly Innocent Frauds of Economic Policy”) He continues, “When it comes time to make Social Security payments, all the government has to do is change numbers up in the beneficiary’s accounts, and then change numbers down in the trust fund accounts to keep track of what it did. If the trust fund number goes negative, so be it. That just reflects the numbers that are changed up as payments to beneficiaries are made.”

I worry about those individuals who decide to take the “benefit” at 62-years of age as they reduce future earnings from Social Security by 30%! That is a massive cut on a monthly basis. Furthermore, it never resets and future COLAs are predicated on the reduced amount. You also potentially impact what your surviving spouse my receive should you pass first. The US government enjoys the benefits of having a fiat currency. As long as our debts continue to be funded by US $s, we have no fear of SS running out of money. Congress making poor decisions as a result of its collective lack of knowledge on how our monetary system truly operates should be of greater concern. More to come in a couple of months.