Episode 396： Social Security & Retirement Explained
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Summary
Social Security was first introduced in 1935 by President Franklin D. Roosevelt and his administration introduced Social Security to the American people in order to help people who were nearing the end of their working life. Social Security was intended to provide a safety net for the elderly and disabled.
Transcript
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30 seconds. One time for the underdog. Ignition sequence start. Let me see you put them up. Reach the sky, touch the stars up above. Cause it's one time for the underdog. One time for the underdog.
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I'm Patrick, made to be your host of Value Tame. And today we're going to talk about retirement and social security and the history of it. How did it get started? Who came up with this idea? Why are we giving this out to people?
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How did it go from something small of helping people out to what it is today to the point where it's ballooned?
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Maybe America won't even be able to afford to offer social security to people.
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So again, if you got a 401k, if you got a defined benefit plan, if you're planning on retiring on time, you do not want to miss today's how-to.
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The first thing we're going to look at is life expectancy at the time where social security was introduced versus actual age of retirement for 100% benefits.
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Here's what it looks like. 1935, FDR introduces social security, right?
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Age of retirement for 100% benefits was 65, but the life expectancy for the average male in America was 59.9 years, which means barely 60, which means 5.1 years short of 65, which means the average male is never going to see these benefits.
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Now, the average female was 63.9, which is still a shortage of 1.1 years, at a time where the population in America was 127 million.
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Now, this continues. If you go through it, 1945, still 65, but the life expectancy goes up to 63.6, which is still short.
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Average female life expectancy was 67.9, which means now the average female gets to enjoy the benefits for about 2.9 years.
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Population was 139, right? Now, when you continue in 1955, the age of retirement, 100% benefits goes to 66.
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Then a male life expectancy goes up. Now, they're seeing benefits of it for about 0.7 years, and the average female's life expectancy is 72.8.
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They get to live 6.8 years enjoying retirement benefits from social security.
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And then as you go down, it bumped down a little bit, and then it came back up.
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Well, today, at around 2016, the average life expectancy for a male is 76.2, which means they get 9.2 years of benefits,
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and the average female's life expectancy is 81.1, which they get 14.1 years of benefits.
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So now you look at this and you say, Pat, what's the big deal?
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The program was initially created for those that, in case you live too long, let us help you out with some payments here,
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because you need some payment planned from the government to support you.
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It was in case you outlived, which means if we take the same exact formula of how it was started in 1935,
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and look at it for today, this is when the benefits need to start today,
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if we go exactly on how FDR and his administration introduced social security to the American people.
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So the average life expectancy today in 2019 for a female is 81.4, and for a male is 76.36, okay?
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So remember over here, where female was 1.1 year less than what the life expectancy was,
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and for male was 5.1 years less than what the life expectancy was.
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That means the average benefit for a female would start at 82.5,
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and the average benefit for a male would start at 81.46.
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If social security today, the benefits, was set up the same exact way, that it was in 1935,
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benefits would need to start at 82 years old today.
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Can you imagine if somebody on the campaign trail right now for presidential election,
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where everybody's saying, Medicare for all, this for all,
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I want to be able to eliminate school loans, I want to be able to eliminate this.
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Imagine somebody on campaign trail says, I think America's broke.
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I think we think America's rich, but man, America's in a lot of debt.
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I think we need to really consider raising the social security benefits to 82 years old,
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similar to how it was when it was first introduced by FDR.
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What do you think would happen to that candidate?
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There's no way in the world anyone's going to vote for that person because people want that benefits.
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And a lot of this is the politicians to blame because they keep giving more free things,
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more free things, and people kept voting for it, and now America's paying a price for it.
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In 1937, there was a total number of 53,000 beneficiaries receiving benefits.
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Now keep this in mind, it's 53,000 on roughly 130 million people living in America at that
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The total benefits that America had to pay per year was roughly $1.278 million.
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It was an average of $24 of payment per beneficiary per year, not per month.
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Let me say this again, $24 per year in 1937 to only 53,000 people, which in today's dollars,
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that $24 is really $430 if you do the inflation math in it.
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By the way, the $430 a year compared to today is $16,258 per year.
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Hey, I know America's going through tough times.
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In today's dollars, $430, here's some money to help you out with.
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Over the years, politicians turned it into a retirement plan.
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In 1940, now we have 222,000 people receiving the benefits.
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Then it went to $157 per year, which is in today's dollars, 2008-17.
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It was about $961 million per year, $276 per payment, which is around $3,000 today's dollars.
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If you want the PDF, we'll have the PDF for you at the end, so stick around for that part.
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But today, 63 million people benefit from this.
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63 million people are taking Social Security today.
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Out of 330 million people in America, it's costing us $1,022,000 per year.
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That is 25% of our annual expenses, U.S. expenses, is all due to Social Security.
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$16,258 on average is what we're experiencing today with Social Security.
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So you look at this math here and say, wait a minute, Pat.
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Now let's go through some of the dollars on this side.
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You look at this and you say, so how does it work today?
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If you take Social Security at 62, you get 70% of benefits.
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Pre-1960, the numbers favor them a little bit more.
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Post-1960, you're looking at the numbers you're looking at.
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Remember how I said to you, the real cost is 25% of America's expenses per year?
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Remember, this is America if it was a business.
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I'm going to keep reminding for everybody to realize the basic math of this.
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But America spends $4.1 trillion per year, which is a loss of $800 billion per year.
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And because of that, here's our total unfunded liabilities.
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U.S. is total unfunded liabilities, which means we have not paid for this.
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If you go on U.S. Debt Clock website, you can see the link where you normally share this
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And when I did it, it's probably going to be higher when you do it.
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When I did it, Social Security, unpaid commitment, is $20 trillion, $60 billion.
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$20 trillion, $60 billion that we haven't yet paid out, that we've got to pay out, and
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For unfunded liabilities with Medicare, it's roughly $31 trillion.
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But total unfunded liabilities of America, you ready?
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$126 trillion, $248 trillion, $618 trillion, when we did it just now.
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I know a lot of people that go into their house, they've got exotic cars, they've got
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Bugattis, they've got Rolls Royce, they've got $300,000 watches, $46,000 suits, and oh
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He lives in a $20 million house, and then I look at their finances.
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They're in debt so much money, they have no idea what the hell to do.
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Just because these guys make a lot of money per year doesn't make them rich.
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It's a glass house story, and that's exactly what's going on with America.
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Because politicians kept selling, kept selling, kept selling, and we kept voting.
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Smaller countries who don't have this kind of liabilities are richer than America is.
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Norway is richer than America is if you go simply based on basic needs analysis of what
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a financial advisor at these big firms do when you look at their income assets versus
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Are you saying we lowered the amount of payments?
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It's not that easy to say it's black and white, and here's what we got to do.
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You and I, our family, our parents, our grandparents rely on retirement, and it's kind of adjusted
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One of them is based on your investments and savings.
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If you do a good job saving money, investing money, guess what?
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When you get to a certain age, you're not relying on anybody on taking retirement because
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Instead of doing a barbecue every weekend with your friends and having cases of beer
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Instead of going to Europe every year, maybe you went to another place.
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Instead of living in the house you wanted to live in, maybe you bought a smaller house
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Well, grandma's got a room upstairs or she's got her room over there, you know, or grandparents
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They help raise the kids so we don't have to have a cost for a nanny and we don't have
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They help with food and they kind of help with this.
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We're not doing that anymore in America, right?
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You know, grandparents have to live by themselves and kids are kind of like, well, mom, I've got
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So family, all that stuff, that's another cost.
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You rely on a company to take care of an employee.
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Matter of fact, there used to be a time when the whole debate took place with Ford and their
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When there was a strike, Ford employees came for a pension plan and said, if we give you
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a certain amount of our lives and we work for you, we want to be able to be taken care
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And Ford finally with the union, they negotiated, said yes.
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But in 1980, we had 112,000 pension plans in America.
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Today, we only have 24,000 pension plans in America.
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So companies are being pushed around with taxes where they're like, listen, I can't afford
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Now, the benefit of 401k is if the company goes belly flopped, you can take your 401k to
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But sometimes the pension is linked to the company's stocks.
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And if the company goes belly flopped, so does your pension.
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So there's a lot of that going on with company.
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I mean, it's costing, you know, 25% of their expenses per year to fund social security.
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Should we all rely on the company or should we rely on, you know, us continuing working,
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Because a lot of people nowadays are like, well, you got to retire early.
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Who the hell came up with this whole thing about retiring early anyways?
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You know how many people when they retire, they feel like they're getting closer to death
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Why do you make me think 65's the age or 67's the age?
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He says, man, every time I make something, I feel good about it.
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I got to make something to feel like I'm still giving value.
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My dad gets upset with me when I, I'm on the selfish side as a son.
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I want him to be right next to my kids so grandkids can get some value from their grandpa.
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So we're looking at this whole retirement thing.
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And in a way, the companies are partially to blame.
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We are partially to blame because we voted and we kind of are allowing others to adjust
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You know, some of the family rituals and cultures is also something that we got to look at because
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family, you got to also do your part where your kids want to support you.
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All I'm saying to you is I'm going to speak to you.
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Forget about if they're Andrew Yang fans and saying, to hell with you, Yang gang, $1,000
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Bernie, we got to write off all the college debt, that government, $1.6 trillion.
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We got to go, you know, Trump, we need more military.
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Don't let anybody put a retirement age in your head.
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Don't even let that word linger and come into your head.
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Some of us, like my dad, are going to work 40 hours.
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There's a lot of people that work to the very, very end because they want to keep building.
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In your mind, maybe you go from working 40 hours to 20 hours to 10 hours, but you're
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transitioning into still doing something because you got to be able to earn your own income.
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You cannot rely on the government or your 401k to take.
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A lot of people are worried about climate change.
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This is going to affect everybody living in America.
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And that's when all of a sudden the market goes like this, a sudden crash like this, because
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This is not hypothetical, without something we've seen.
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This is pure proof that we know this is going to be taking place.
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Number one, get a little bit more serious about your money.
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Understand the rules of money and how it works.
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Constantly fine-tune your skill set so your skill set can advance for years and you're always
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adapting with how automation, AI, everything is moving.
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If your skill set was good for the 80s and 90s but not good today, you better start finding
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Like what do you need to start looking for where you can find a way to, you can't rely
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on taxi and Uber if you're 61 years old saying, that pays me an additional $2,000 a month
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You have to start thinking about those adjustments yourself.
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Start being a little bit more frugal with your money.
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If your company offers a 401k plan or benefits plan and they match, start putting all the
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Not all your money, but whatever them, if they're matching 100% up to 5% or 100% up
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to 4% or 50%, nothing's going to give you better returns than that.
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Actually, go sit with your person and ask them, what are the funds for our 401k?
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Because if you rely on this to take care of you and this to take care of you, times have
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That's the only way we can be a little bit more free without being affected by this, without
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You are going to be affected by this, but not as much if you're able to control yourself.
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That's what I would do if I were you, and that's the history of social security.
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Thanks, everybody, for listening, and by the way, if you haven't already subscribed to
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Give us a five-star, write a review if you haven't already, and if you have any questions
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