Book Summary and Analysis |

Money, Personal Finance and Investments



A Guide to Kotlikoff, Moeller and Solman’s

Get What’s Yours:

The Secrets to Maxing Out

Your Social Security


Summary and Critique,

Key Ideas and Facts

by I.K. Mullins

Copyright©2015 I.K. Mullins. All Rights Reserved. No part of this book may be reproduced or retransmitted in any form or by any means without the written permission of the author.

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II.1. The Future of the Social Security Program

Kotlikoff and his co-authors do not share a common vision of the future of the Social Security program. Philip Moeller is more optimistic about the program’s future. Kotlikoff observes that over the long history of Social Security, the US government has been able to prevent its collapse. However, it is questionable whether the government will be able to continue making changes in order to keep the Social Security program “alive.” Kotlikoff expects that people who today are 55 and older, will receive their full Social Security benefits. However, people who  are currently younger than 55 will receive some limited benefits, and they will most likely have to pay higher taxes in order to receive those benefits. Paul Solman’s opinion on the future of Social Security is somewhere in between.

Whereas they want to think that the US government might find a way to keep the Social Security program going for many years to come, I would like to point out that the future of Social Security remains uncertain because of its solvency issues. In order to understand how Social Security can become insolvent, let’s look into how Social Security benefits are funded.

The Social Security trust fund is managed by the Department of the Treasury. The fund receives money through payroll taxes, taxes on pensions, interest earnings and some other sources. When the amount of incoming money exceeds the amount of money paid in benefits, the resulting surplus is invested in “special issue” government bonds, which are not publicly traded. These bonds are kept in trust and the money goes to other government programs. Consequently, the Social Security trust fund has no actual money. It only has special bonds, which are basically a promise to repay (a bunch of IOU notes).

Do these special bonds have any real value? Will the US government be able to meet future obligations with respect to these bonds? As long as these bonds do not have any real value, they exist only as claims that will have to be financed in the future by reducing benefits, increasing taxes, and/or borrowing from the public. Furthermore, because the bonds are not publicly traded, and they exist only as the Government’s promise of repayment, their reliability relies on that of the dollar.

Until 1972, the US dollar was backed by gold. Today, it is fiat money, which is only backed by the government’s promise. As long as the US dollar remains the most common currency for international reserves, one can hope that the government will keep its promise to repay the “special issue” government bonds. However, should the situation change, the “Social Security” bonds might become worthless pieces of paper.

Certainly, the possibility for the US dollar to lose its status as the international reserve currency seems to be very remote. However, the US dollar has enjoyed the benefits of this special status only for a few decades (the Bretton Woods System became fully operational only in 1958). As many other economies, including the Chinese economy, are rising, one should keep in mind that change is the only constant thing in this world. Indeed, Americans have witnessed over the last couple of decades just how unreliable financial systems can be.

In his article, “Fearing the worst,” The Economist’s Buttonwood columnist writes,

There have been lots of cases of paper money systems collapsing in hyperinflation (the French assignats of the 1790s, the American confederacy, the Weimar republic and so on). It is conventional to assume that modern central bankers, with their degrees and mathematical equations, will avoid this problem. But those bankers have been surprised by so many things already, from the fragility of the financial system to the soundness of the housing market, that our confidence in their wisdom should at least be shaken.


II.2. Social Security and Economic Inequality

In their book, Kotlikoff, Moeller and Solman discuss some well-known strategies as well as some lesser-known benefits (for example, survivor and spousal benefits). One important lesson that readers can learn from their book is that, overall, Social Security does not distribute benefits in accordance with how much people work and how much Social Security tax they pay. That is, reward is not proportional to the contribution.

 For example, Social Security’s spousal and survivor benefits reward with money those people who do not work and who never worked. (One can argue that a non-working spouse does work of cleaning house and cooking meals, but would not he or she have to clean his or her own place and cook meals when living as a single person?)

In Kotlikoff’s opinion, Social Security inequalities are despicable. A person who works all his or her life at a fast-food chain store and contributes into Social Security, can get much less benefit than a person who never worked in his or her life enjoying a lavish lifestyle. Kotlikoff points out that the creators of Social Security, who were older white males, incorporated such unfairness in the system when they designed it a few decades ago. That is, they designed the system that would serve their own interests before anyone else’s.

As a result, single people find themselves at a disadvantage because the system offers more types of benefits to married couples. Furthermore, the system favors married couples with one earner over married couples with two earners.

Kotlikoff and his co-authors warn readers that the Social Security system is not designed to automatically award people with all the benefits they are entitled to. In order to claim all the benefits people are entitled to, they have to know and understand the complex system of benefit rules. It is not sufficient to rely on the advice from the Social Security customer representatives because some of them are not trained well enough and are not knowledgeable enough to provide people with correct information. Because many Americans are not informed enough about Social Security benefit rules, they fail to claim billions of dollars every year.

The situation with the Social Security benefits system is to a certain degree similar to that of the federal income tax system. Both Social Security and federal tax systems are extremely complicated. Those people who can afford to hire professional advisors can get the most out of the Social Security benefits system and the federal tax system, making economic inequality worse.

Kotlikoff points out that the Social Security system intentionally makes its language misleading in order to make people mistakenly think that they will get more out of the system as long as they contribute more to the system. He also observes that many secondary earners contribute to Social Security during their whole lives, and their benefit turns out to be not a penny more than the benefit they would receive if they had never worked in their lives.


II.3. Social Security Benefits and Real Inflation

In Get What’s Yours, Kotlikoff repeatedly emphasizes that a great advantage of Social Security benefits is that they are inflation-proof. He writes that by adjusting benefit payouts in accordance with the inflation rate, “Social Security does a good job of maintaining the real buying power of the dollars it pays out. And this is a big, big deal.”

Indeed, on January 1 of each year, Social Security increases all the benefits it is paying to beneficiaries by the rate of inflation over the course of 12 months, between the prior two Octobers. This rate of inflation is actually a commonly used version of the Consumer Price Index (the CPI), which is one of the indexes that the government uses to measure inflation. However, the US government calculates the CPI in such a way that it turns out to be less than the real inflation rate.

Let’s look into how the CPI is calculated by the US government.  According to the US Department of Labor, “The CPI measures inflation as experienced by consumers in their day-to-day living expenses.” In other words, the government tells us that the CPI is based on consumer-spending habits, not necessarily inflation from all sources. The government lowers the CPI by altering the list of consumer products measured. For the last 30 years, the US government has changed the way it calculates the CPI more than 20 times.

Again, as long as the US government manipulates the CPI, it misrepresents the rate of inflation. The US government is motivated to manipulate the CPI and keep it as low as possible because the CPI is connected to automatic cost-of-living increases for millions of Americans, including Social Security beneficiaries, military and federal civil service retirees, etc. Moreover, the CPI does not measure any reduction in the value of money due to money creation. Obviously, the more money that is created on paper or electronically, the less valuable that money becomes.

So, what is the real inflation rate in the US? According to the Bureau of Labor Statistics, inflation is a process of continuously increasing prices. The only true measurement of inflation has to be a fixed market basket of goods and services, which includes exactly the same goods and services today as 30 years ago. The US government does not use such a fixed market basket of goods and services. Instead, the government annually changes the items in the market basket of goods and services, replacing more expensive items with different less expensive items. For example, if the price of beef increases, then it is replaced by cheaper chicken meat for the CPI calculation.

John Williams, founder of Shadow Government Statistics (also known as “ShadowStats”), argues that the real inflation rate is close to 10 percent per year. In one of his reports, he writes,

The current US financial markets, financial system and economy remain highly unstable and increasingly vulnerable to unexpected shocks. At the same time, the Federal Reserve and the federal government are dedicated to preventing systemic collapse and broad price deflation. To prevent any economic collapse—as has been seen in official activities in recent years—they will create and spend whatever money is needed, including the deliberate debasement of the US dollar with the intent of increasing domestic inflation.

You can notice the discrepancy between the CPI and the real inflation rate even without any complicated calculations. If you actually have to pay for various items and services, from groceries to kid’s college tuition and textbooks, from your clothes to medical services, from car and home owner insurance to plumber’s services—then you are aware that the price of all these goods and services increases by far more than 2 percent every year.

In his article, “If There’s No Inflation, Why Are Prices Up So Much?” Michael Sivy points out at another indicator of real inflation when he writes,

Perhaps the most telling indicator—albeit a slightly facetious one—is the Big Mac index, popularized by The Economist magazine. McDonalds hamburgers are available in many countries and their prices reflect the cost of food, fuel, commercial real estate, and basic labor. The price of a Big Mac, therefore, can be used to compare the economies of different countries—or serve as a bellwether of inflation in a single country. Since the recession ended, the cost of a Big Mac in the US has risen from an average of $3.57 to $4.37, or 5.2% a year.

If the real inflation rate is higher than the CPI, then middle-class wage-based buying power is decreasing and so are Social Security benefits. For example, if the real inflation rate is 10 percent per year, then a person’s wage-based buying power decreases as long as the increase in the person’s wage is less than 10 percent in the same year.  So if the government increases Social Security benefits by, let us say, 2 percent, then the buying ability of those benefits becomes reduced as well.

If we take into consideration the real inflation rate, which is higher than the CPI, then Kotlikoff’s estimate of a 76 percent increase in benefits for those people who begin collecting benefits at the age of 70 (as compared to those people who begin collecting benefits at age of 62) is exaggerated. Moreover, even a small difference between the CPI and the real inflation rate will have a significant impact on retiree benefits over time.


II.4. The Real Value of Kotlikoff’s Book

Kotlikoff’s and his co-authors’ book, Get What’s Yours, educates people about the Social Security system, providing them with comprehensive information on Social Security benefits. Their book brings to light various problems with Social Security benefits. For example, Kotlikoff suggests that to a certain extent, the US government has intentionally made Social Security rules ambiguous and complicated in order to reduce benefits. About 40 percent of the time, Social Security representatives give wrong answers to people’s questions about their benefits.

Kotlikoff and his co-authors’ book is limited to the current state of the Social Security benefits system, and their book does not offer any advice to the next generation of retirees who might encounter problems with Social Security solvency in the future. In their book, Kotlikoff, Moeller and Solman admit that the Social Security benefits system is very complicated and that the future of Social Security benefits is unclear. However, they write that their book is “about getting what’s yours, not fixing the system or bemoaning its fate.”

Their book certainly lives by its “Carpe Diem” motto, providing retirees with sound advice on how to max out their Social Security benefits today.



“Policy Basics: Top Ten Facts about Social Security.” [the article is available at]

“Women and Social Security.” [the article is available at]

“Women’s Stake in Social Security.” [the article is available at]

Buttonwood columnist, “Fearing the worst.” The Economist [the article is available at]

Gruber, J., Peter Orszag, P.   “Does the Social Security Earnings Test Affect Labor Supply and Benefits Receipt?” National Tax Journal, Vol. LVI, No. 4 December 2003 [the article is available at]

Kotlikoff, L.J., Moeller, P.,  Solman, P. 2015. Get What’s Yours: The Secrets to Maxing Out Your Social Security. Simon & Schuster

Sivy, M. “If There’s No Inflation, Why Are Prices Up So Much?” [the article is available at]

White, R. “Top 6 Myths About Social Security Benefits.” [the article is available at]

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