January 2014 Update: Social Security Enrollment

This report was finally released yesterday…about a month late for some reason, but at least we have it now. So…just to recap, The umbrella of SS covers about 58M individuals. 38M are retired individuals, about 9M are disabled workers, and the balance are generally spouses/widows/children of retired or disabled workers.

Each month, obviously we have new people retiring, some say 10k per day….and of course we also have people passing away each month. Note that retirements especially are seasonal, and I suspect to some lesser degree, so are deaths, so it is important to compare the current month vs the prior year as this is far more relevant than the prior month.

I track this monthly because SS is a huge piece of the federal budget, and secondly, I am on the lookout for a substantial increase in retirements at some point over the next few years, and I believe that this report will provide evidence of this in real time.

Fortunately, the January 2014 report does not have any evidence of an impending spike. Traditionally, January usually has a large increase in retired workers….I guess people try to retire near the end of the year, and get all of their paperwork completed by January.??Personally, I’d choose to retire probably in the fall….depending on where the tax brackets were in relation to my income, but that’s just me…maybe I’ll cover it in a “fun with math column” when I retire…in about 35 years:)

This January was no exception, with an increase in retired workers of 150k, but 21k under Jan-2013’s 171k, but right in line with Jan-2012 at 153k. Annualized, we are adding 1.15m people per year to the retirement program…roughly the same pace as last year. So while there is no spike…yet…we are still adding a huge number of people to the program.

Quick math…adding 1.2M people, at $1300 per month….So divide 1300 by 12.4%(ss withholding rate)….and you get that it takes an additional $10,484 of monthly income by a worker to support each new retiree. So if for each retiree, we added one new job at 126k per year, we’d be more or less ok right?  Well, there probably aren’t too many of those…so scratch that. If you happen to believe the federal jobs report, we added 2.2M jobs over the last 12 months, including 113k in January. So if we pencil this all out….we need each marginal worker…all 2.2M of them to contribute $8500 per year to cover the 1.2M new retirees. again…divide by 12.4%….If they all can just average $69k of pay, we’ll be fine. Still a stretch huh?? One last try. How many minimum wage employees (assuming Obama’s new $10 rate passes) do we need to add per year just to pay for the additional 1.2M retirees? “Only” 7.5M….per year indefinitely.

So while the long run still appears to be hopeless, that’s been known for a few decades now. There was some good news in the report. For the first time since 1997, the number of disabled workers actually showed a month over month drop falling 12k to 8.930M from last month’s record 8.943M. Drops elsewhere pulled the consolidated number to only +100k overall vs last year’s 146k January total increase. That’s a pretty big drop….it will be interesting to see the February report…..is this just a blip, or could our trend actually be headed down a bit?