The Future of Social Security

By Daniel Powell

With people living longer, baby boomers nearing retirement, and having a lower birth rate then in the past, it is easy to say that the current system is in trouble. These circumstances have lowered the worker to beneficiary ratio from 16.5-to-1 in 1950 to 3.3-to-1 today. Forty years from now it is projected to be 2-to-1. This information illustrates that we have a large problem on our hands because negative cash flows are predicted to begin in 2017 and trust fund reserves will be exhausted by 2041. For alternatives currently being discussed to fight the problem are increasing payroll taxes, decreasing benefits, using other financing sources such as general revenues, or prefunding future benefits through either personal savings accounts or direct investments of the trust funds.

Some think that the children of today may be faced with the decision of paying retirement benefits to their parents or paying for programs that could help their own children. The early retirement age of 62 for social security really presents a problem because the baby boomers did not have enough children to replace the people retiring. Plain and simple, this means the number of taxpayers will shrink. Figuring it takes about 25 years to make a new taxpayer, the future of social security does not look that bright. We must remember that the finances of social security are based on the relationship between the number of workers paying taxes and the number of retirees receiving benefits.

When the problem does start in 2017, social security will start using more funds than have been accumulated since 1983. When 2041 comes, the program is expected to only cover about 3/4's of what it is paying out. This means that some benefits will not be able to be paid on time. Benefit reductions could be a large possibility, leaving people who counted solely on social security in quite a predicament. The worst part is that no major actions to fix this problem have taken place and people are left in the dark about how much extra they will need if reductions do occur. The information presented should send a large message to those who have quite a long time to retire. You need to start saving early and planning properly as there will be reduced social security or none at all by the time they are ready to retire.

The original articles can be viewed in their entirety below:
Social Security's Inevitable Future
The Future of Social Security Retirement Benefits
Frequently Asked Questions About Social Security's Future