If You Can’t Dazzle Them With Your Brilliance Baffle Them With Your BS…

Concept of the businessman liar with his shadow

Readers often ask for investment advice. When I began writing for Casey Research, I was warned by the legal team to begin any response with, “I am not licensed or qualified to give individual, personal investment advice. Please be sure to consult with your personal financial advisor.”

While I may not be duly licensed and trained, I’ve seen investment advisors, with lots of fancy plaques and designations, giving clients what I consider bad advice, while raking in lots of profit for themselves.

The King Of The Hill

I just reviewed the 2024 J.P.Morgan Asset Management Guide to Retirement.

Check out Wall Street On Parade’s article, Freakonomics and Frankenbanks:

“That $11.7 billion in net income at JPMorgan Chase Bank, N.A. represents 18 percent of all bank profits at all 4,568 FDIC-insured banks in the United States.

That would be a highly dangerous and systemic bank based on that fact alone.

But when one throws in the nonstop sleaze (like banking Bernie Madoff and Jeffrey Epstein for decades) and five felony counts this bank has racked up during the tenure of its Chairman and CEO, Jamie Dimon, it becomes crystal clear that this bank poses unacceptable and unmanageable risk to the financial stability of the United States.”

Hmmmm…. Consider the source. JPM has been fined billions for breaking the law. Now I see advice from their Asset Management Division. I’m sure they are profiting handsomely from asset management and this fancy report will help them garner new clients.

Hand waving a red flag isolated on white backgroundI may not be licensed or qualified, nor did I spend last night at a Holiday Inn Express (like the old TV commercial), but I spotted some issues raising a red flag.

I reviewed the section regarding Social Security benefits calculations. Between the bank and the government, the “Baffling BS” has hit astronomical proportions.

Their snazzy graphs are designed to impress. Note the disclaimer at the bottom of almost every page:

social security timing trade-offs chart

social security benefit claiming consideration chartIt’s not what the fancy charts contain that bothers me, it’s what is (deliberately?) left out.

Let’s start at the beginning.

The SSA website offers a life expectancy calculator.

Assume Joe Smith was born January 1, 1962, and is eligible to file for Social Security Benefits. The SSA calculator indicates the “average number” of years a male born on that date will live is 21.2 years; age 83.7. If he lives to age 67 (full retirement age), on average he should make it to 85, and at age 70, on average will make it to 85.9.

Reviewing benefit options.

Using the AARP benefits calculator, let’s assume Joe earned $100,000 to estimate his benefit options:

your estimated benefit calculator screenshot

Let’s run some numbers. If Joe filed for benefits at age 62, he would draw $2,194/month, collecting $26,328 annually. At age 70, he would have collected $210,624 (8 x $26,328). If he waited to file until age 70, his monthly check would be $1,692 higher; $3,886 per month.

$210,624 divided by $1,692 = 124.5 months (10.4 years). Joe’s break-even point would be just over 80. When accounting for the time value of money, his real break-even point is close to his “average” life expectancy.

Here’s the bet.

If you take benefits early and don’t make it to your “average” life expectancy, you won the bet. Should you choose to defer benefits, you are betting the government that you will live longer than “average.” Unlike a life insurance policy that pays off if you die early, you win if you defer your benefits and then outlive your “average” life expectancy.

I have a photo of six of us taken at our 50th high school class reunion. Ten years later, I was the only one left. Are you willing to bet the government a lot of your money on how long you will live?

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Changes Coming?

The Social Security Administration (SSA) tells us:

“…. Benefits are now expected to be payable in full on a timely basis until 2037, when the trust fund reserves are projected to become exhausted. At the point where the reserves are used up, continuing taxes are expected to be enough to pay 76 percent of scheduled benefits.

…. Congress will need to make changes to the scheduled benefits and revenue sources for the program in the future. The Social Security Board of Trustees project that changes equivalent to an immediate reduction in benefits of about 13 percent, or an immediate increase in the combined payroll tax rate from 12.4 percent to 14.4 percent, or some combination of these changes, would be sufficient to allow full payment of the scheduled benefits for the next 75 years.”

The longer Congress waits, the bigger the changes.

JPM fails to mention the trust fund is nothing more than shady accounting. The government collected premiums and paid out benefits. Excess contributions were used to pay bills; they made an accounting entry – putting government IOU’s (political promises) into the so-called trust fund. If a private corporation did this, people would be going to jail!

The charade began to unravel with the invention of the birth control pill; the working-class birth rate is declining. Now that Baby Boomers (1946-1964) are retiring, Social Security premiums collected no longer exceed benefits; creating a shortfall.

“Depleting the reserves” is accounting BS. They take IOUs out of the trust fund in the amount of the shortfall, requiring the government to borrow even more on top of their record budget deficits. There is no money in the fund, only political promises, called unfunded liabilities.

The US Debt clock keeps score:

us debt clock screenshot social security liabilityThe Debt Clock projects out to 2028 at current rates:

us debt clock screenshot social security liability projected 2028By the end of 2028, Social Security promises will have increased by 30%, without ample funding to cover the cost. Medicare is even higher.

Politicos are unwilling to raise taxes and/or cut expenses to cover the shortfall. Deficit spending continues at historic proportions. Interest expense on government debt just surpassed the military budget and soon will equal the amount of personal income taxes collected.

woman gives a speech without content in a lectern while her nose grows. concept of political liesPoliticos trumpet themselves as the “protector” of citizens; branding their opposition as devils who are going to cut your social security. The Uniparty knows they can’t keep their promises but chooses to do nothing, while the cost of a remedy compounds.

Former Governor Chris Christie, recently proclaimed “Rich people should not be collecting Social Security.” It’s just a matter of time….

In 1935, the Federal Insurance Contribution Act (FICA) was sold to the public as an insurance program. Payroll deductions, matched by employers, were called contributions.

FDR Social Security Quote

Politicians didn’t dare scrap social security; however, they changed the rules. There are no “taxes in there” to pay benefits.

Politicians baffling the public worked for decades. The “damn politicians” stole the excess contributions, spending wastefully without adequate taxation, while adding IOUs to a phony trust fund. It’s called generational theft. The cupboard is bare; promises must be broken. USDebtClock.Org predicts the budget showdown in 2028.

I recommend everyone check with a licensed advisor about when to file. There are some circumstances where deferring benefits may help protect a surviving spouse. However, that does not change the facts; there’s no money in any trust fund to cover the promises.

The next president is going to be on the hot seat for trillions of political sins of those in the past. Expect real turmoil.

The dirty little secret…

Young lawyer making silence or shush gesture on white background shh quietJPM’s fancy report dazzles us with math. The fundamental premise is that 10-20 years in the future Social Security will exist as it is today. Joe could live to be 100, but when the government changes the program (which SSA says must happen), all their highfalutin formulas are no longer valid.

I expect 62-year-old Joe will see many changes before his judgment day. Some possibilities:

  • Raising the retirement age for collecting benefits
  • 100% of Social Security Benefits taxable
  • Benefit reductions based on net worth and income
  • Huge Medicare increases reducing benefits & coverage
  • Major downward revisions to the automatic inflation adjustment

Here is the JPM “Decision Tree” chart:

claiming social security decision tree chartSTART HERE asks, “are you working?” If you haven’t reached full retirement age, there are large benefit reductions based on your income. Upon reaching full retirement age, the benefit reductions go away. They suggest, “Consider claiming your benefit.”

JPM doesn’t mention that automatic inflation increases are nowhere near what retirees are experiencing. Your most valuable Social Security check will be your first one. With each passing month, the buying power will go down.

Even if Joe doesn’t need the money, he’s probably better served by taking the benefits and investing the money – including buying some gold. That will move his break-even point back even further.

What did JPM leave out?

The SSA tells us the program is unsustainable! Once past full retirement age, they forget to ask, “Do you trust the government will keep the program as it is today and keep their promise?”

If the answer is “no”, all the fancy charts, formulas and graphs become obsolete. A bit too baffling, in my opinion. I hope JPM is keeping their errors and omissions insurance premiums up to date, they are misleading the public.

In the meantime, I hope Joe is stocking up with gold – he’s gonna need it!

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On The Lighter Side…

I really appreciated the kind notes I got last week regarding my interview with Richard Maybury. I find it sad when so much I write about is how the corrupt, power-hungry political class disrupts the lives of regular, hard-working citizens. I agree with Richard, politicians may start their career hoping to “serve”; however, it doesn’t take long before greed, and power cause them to lose sight of doing the job the founding fathers envisioned.

Richard feels our founding fathers made a mistake by not limiting the government powers and actions outside our country. I feel they also overlooked something else.

In the late 1700’s it was a true sacrifice to “serve your country.” What would it have been like riding a horse, or in a wagon for days to Washington? Elected leaders would be away from their families for months, communications were very difficult, it was a real sacrifice. The idea of a “career politician” probably never entered their mind. To them, nobody in their right mind would do that. Members of the house were elected every two years and senators were appointed by the governor and could be recalled at will.

Had they envisioned what we have today, congressional term limits would have been written into the Constitution. When Newt Gingrich wrote his “Contract with America” and had politicians commit to it, everything was implemented except congressional term limits; it never got out of committee.

I contrast that with what I see here in rural Indiana, in the middle of “dirt farmer” country. On the first day of summer, Jo and I took a drive down the back roads. We saw wheat ready to harvest and corn peeking a few inches out of the ground.

Farmers in their bib overalls gather and worry more about the weather, hoping for ample rain and bumper crops so they can feed themselves and the world. When it comes to politics, most just want the damn politicians to leave their family alone so they can enjoy life.

A budget showdown and political upheaval is near, politicians and dynasties will rise and fall. Until people no longer have to eat to survive, one constant is the farmer. They will feed their families and we all hope they have enough left over to feed the world.

Next week is the 4th of July. Enjoy the holiday and remember our Declaration of Independence. Our founders gave us the greatest country in the world, we just need to dump the political class, hit the reset button and fix things for the next 200 years.

Quote of the Week…

3d white cartoon holding blue and white puppets“There is nothing which I dread so much as a division of the republic into two great parties, each arranged under its leader, and concerting measures in opposition to each other. This, in my humble apprehension, is to be dreaded as the greatest political evil under our Constitution.” — John Adams

And Finally…

Jo found some clever sayings for our enjoyment:

  • Don’t be ashamed of who you are, that’s your parent’s job!
  • “I think I’ll write a book. All the words are in the dictionary, you just have to put them in the correct order.” – Homer Simpson
  • Deja Poo – The feeling that you’ve heard this crap before.
  • “If black boxes can survive air crashes, why don’t they make the whole plane out of the stuff?” – George Carlin
  • When you’re at the checkout and they ask, “Did you find everything?” Just say, “Why, are you hiding stuff?”
  • I hate when I go to the kitchen looking for food and all I find are ingredients.
  • “I stopped buying women’s magazines. The only time I ever see someone who looks like me is under the word ‘before’.” – Sarah Millican
  • “Never eat more than you can lift.” – Miss Piggy
  • “Always do sober what you said you’d do drunk. That will teach you to keep your mouth shut.” – Ernest Hemingway
  • “Just because I don’t care, doesn’t mean I don’t understand.” – Homer Simpson
  • “It’s strange how anyone going slower than you is an idiot, yet anyone going faster is a maniac.” – George Carlin
  • “You can’t have everything. Where would you put it?” – Steven Wright

And my favorite:

  • Remember, today is the tomorrow that you worried about yesterday.

Until next time…

Dennis Miller

“Economic independence is the foundation of the only sort of freedom worth a damn.” – H. L. Mencken

 

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