Eighty years ago on Friday, President Franklin D. Roosevelt signed the Social Security Act into law. The subsequent Social Security system has lasted until now, but many people are questioning its future.
Will the program survive another 80 years? How about another 20? Here are six things that you need to know about Social Security and what it might mean for our future.
Social Security is expected to be insolvent by 2034.
The danger to beneficiaries is not coming from those of us trying to improve the programs; it is coming in a few short years when Medicare and Social Security go bankrupt. Or, for those on disability insurance, as soon as next year. By the time a child born today is able to vote, the Social Security trust fund will be insolvent. When today’s preschooler enters college, the Medicare trust fund will be insolvent.
The Social Security Disability Fund is set to become insolvent next year.
The same report also notes that Social Security’s disability trust fund will become insolvent sometime late in 2016. The report claims that 11 million Americans will be impacted by a 19 percent reduction in benefits when the fund reaches insolvency, unless Congress does something beforehand.
Social Security is contributing to our unfunded liability crisis.
At its current pace, the United States will face $127 trillion in unfunded liabilities by 2027. That number includes all major entitlement programs, including Social Security, Medicare, and Medicaid. Virginia Congressman Dave Brat said of the astronomical number:
When Congress and the administration pass the buck, they shift the burden to future generations, who will need to meet obligations imposed by others.
In other words, it’s going to be our generation that gets stuck with the bill.
Currently, the Social Security system is full of waste, fraud, and abuse.
Millions of dollars are wasted each and every year when it comes to Social Security because of fraud within the system. According to a report from this past March, there are 6.5 million Americans with active Social Security numbers who are listed as being 112 years old or older. To put that in perspective, there are only currently 5 million living Americans over the age of 85.
On top of that, the Social Security Administration paid out $16.8 billion in overpayments from the Social Security disability fund alone in the last decade, and an audit found that 216,070 of those payments had been made to fugitives, prisoners, or deceased individuals.
A demographic shift is contributing to Social Security’s instability.
According to the Mercatus Center at George Mason University, in 1945, there were 41.9 workers per Social Security beneficiary. By 2010, that number had sunk all the way to 2.9 workers per beneficiary, and it’s expected to go down to just 2 workers per beneficiary by 2030.
More and more baby boomers reach retirement age every day, with fewer and fewer working-age adults left to support these major entitlement programs. More than 10,000 Americans reach the age of retirement every single day, with that trend expected to continue for about the next fifteen years.
Additionally, in 1935, when Social Security began, the average American man lived for 59.9 years while the average woman lived for 63.9 years. Today, the average life expectancy for men is 76.4 years and 81.2 years for women.
This means that that more people are drawing from Social Security for a longer period of time than ever while fewer people are paying into it—and it’s doubtful that anything will be left by the time our generation reaches retirement age.
Two-thirds of Americans think that Social Security is at a crisis point.
A recent Gallup study has found that 66 percent of Americans believe that Social Security is in a “state of crisis.” On top of that, more than half of those who are still working have doubts that they will ever receive Social Security benefits.
Many prominent experts happen to agree. Just a couple weeks ago, Federal Reserve Chairman Alan Greenspan appeared on CNBC’s Closing Bell and warned of the entitlement crisis, saying:
To me, the discussion today shouldn’t even be on monetary policy, it should be on how do we constrain this extraordinary rise in entitlements.
Over the years, Greenspan has been a proponent of gradually scaling back Social Security benefits, while also indexing the retirement age for the rise in life expectancy.
The facts are indisputable: Social Security is in a precarious position and will likely be insolvent by the time we reach retirement age. Something needs to be done to make sure that our generation does not get stuck paying into Social Security for our entire working lives, only to see the program go bankrupt just as we are about to retire. The solutions range from letting us voluntarily opt into Social Security accounts to raising the retirement age to reducing the benefits paid out by the program either currently or in the future.
Our generation is already burdened with record student loan debt, and we cannot afford to also be saddled with America’s unfunded liability nightmare. What do you think we should do? Leave your comments below.
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