The silent stat that’s killing Social Security: Inside the demographic shift threatening your retirement
Congress must make tough choices to shore up Social Security benefits, not only for current recipients but also those who will retire in the future.
The headlines seem scary announcing that the Social Security retirement trust fund will be depleted of money in 2032 if Congress doesn’t do something to shore up the program. Kevin Lum, a certified financial planner with 15 years of experience on Capitol Hill, is confident that Congress will get a fix across the line before the deadline expires.
However, if no agreement is reached on how to replenish the trust fund before it runs dry, beneficiaries will see their benefits cut. But why is the program running out of money in the first place?
The silent stat that’s killing Social Security
Many would like to blame the situation on the “silver tsunami” of Baby Boomers who have been retiring in droves. The U.S. is currently in the “Peak 65” surge with over 11,000 Baby Boomers, those born between 1946 and 1964, hitting age 65, considered a benchmark for retirement, daily. This is expected to continue through 2027 before tapering off.
However, Former Secretary of Labor Robert Reich says that it’s not their fault. He says that a surge in inequality is to blame. Likewise, the Trustees of Social Security did not mention the “silver tsunami” in their annual report last year. But they did mention the faltering birth rate in the U.S. as one of the three factors weighing on the trust fund.
Even as the number of people paying into the program increases, currently around 184 million, the ratio of people drawing on funds from Social Security compared to those contributing has greatly reduced. Whereas in 1945 there were nearly 42 people paying in for each retiree, that has shrunk to less than 3 to one nowadays.
@reuters In the U.S., the social security fund could be empty by 2034, while in Europe the cost of state pensions is ballooning. Elena Casas takes a look at how the systems that future retirees hope to rely on are running out of cash. #retire #retirement #economy #socialsecurity #fund
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This has made the system unsustainable in its current form, and somebody is going to lose out and see their benefits cut in some way. This will most likely be those in their 40s and younger Lum feels, having to work longer or paying more but getting less, and perhaps the highest earners.
He thinks that Congress will use a combination of the four levers that they have at their disposal to shore up the program much like the 1983 compromise that kept the program from going insolvent at the time.
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