Once Social Security is tapped out, are the rest of us in trouble?

Question

I'm 26 years old. I'm socking away money into my retirement. I'm hearing all these stories of the massive medical costs that baby boomers will need. Have we,as a country, screwed ourselves fiscally?

Answer 1

At age 26, I don't blame you for being worried-
Not one member of congress has come forward and discussed the real issue with Social Security. This is a moral issue which effects both the baby boom generation and the next generation of younger workers; and it can not be understood without a brief history lesson:

Until 1983, Social Security was a pay as you go system - a contract between generations, where the younger generation paid for the retirement of the previous generation. Although next to nothing was saved in the Social Security Trust fund, the system worked fine - because as the wages of young workers increased with inflation, larger benefits could be paid to retired workers to protect of them from the effects of that inflation. But in 1983, Congress recognized that the retirement of the Baby Boom generation would put an unfair burden on the next (smaller) generation of workers unless changes were made to the system. As a result of the massive 1983 reform package, the retirement age was scheduled to gradually be raised to 67 in order to account for longer life spans and social security taxes on wages were increased by about 1/3, in order to build up a real trust fund to help pay for the retirement of the baby boom generation. As a result, the trust fund has built up a surplus of over 2 trillions of dollars - and the baby boomers became the first generation to pay for their parents' retirement while providing for their own as well. By one measure, the 1983 reform package has been wildly successful, as the surplus in the trust fund is now predicted to last at least until 2042, when the oldest baby boomers will be 96 years old if they are still alive. (Even then the Security System will not be broke - It will just have to go back to the old pay as you go system - which may not be much of a problem if the baby boom generation is dead.)

When the social security reform legislation was signed into law by President Regean in April of 1983, he said:

"We're entering an age when average Americans will live longer and live more productive lives. And these amendments adjust to that progress. The changes in this legislation will allow social security to age as gracefully as all of us hope to do ourselves, without becoming an overwhelming burden on generations still to come.

So, today we see an issue that once divided and frightened so many people now uniting us. Our elderly need no longer fear that the checks they depend on will be stopped or reduced. These amendments protect them. Americans of middle age need no longer worry whether their career-long investment will pay off. These amendments guarantee it. And younger people can feel confident that social security will still be around when they need it to cushion their retirement."


Early in his first term, President Reagan promised to balance the Federal Budget by 1983. The problem of course is that we have had massive budget deficits under the administrations of Reagan and Bush I and II. Because the baby boom generation has not yet started to retire, last congress was able to borrow and did borrow over 186 billion dollars from the social security trust fund (in addition the approximately two trillion dollars that have already been borrowed), every penny of which was paid for by FICA taxes on the wages of working people - and congress has no plan in place to pay it back when it is needed to pay for the retirement of the baby boom generation.

This borrowing has masked the true size of the federal budget deficit. President Bush stated that the fiscal 2006 budget deficit was 248 billion dollars.. But this figure does not include the 186 billion borrowed from the social security trust fund last year, nor does it include the approximately 100 billion dollars per year cost of the war. From Fiscal 2002 to Fiscal 2006, the Federal Government borrowed approximately 2.4 trillion dollars, including borrowing from social security trust fund. That 2.4 trillion dollars in borrowing means that from fiscal 2002 to fiscal 2006, approximately 1/4 of non social security government spending was financed with borrowed money. (See www.ctj.org/pdf/def0706.pdf)

The lowest paid minimum wage worker and a person making $95,000 per year pay social security (FICA) taxes at the same percentage rate. The justification for this that FICA taxes are like retirement savings.

When President Bush complained (in his 2005 State of the Union address) that in 2017, the trust fund will be paying out more than it takes in and when he calls the trust fund a "worthless bunch of IOU's," he is in effect asking for "debt relief." He wants to find a way to avoid repaying the debt to the trust fund so that he can preserve his 15% dividend and capital gains tax rates and his other tax breaks for the rich.

It is true that the government bonds in the trust fund don't have economic value like a piece of real estate or stock in a corporation that pays dividends- but they have legal value (they represent a promise by the government to repay a loan when payment is due.) - But more importantly, they have a great deal of moral value. The moral issue is: Is it right to borrow and spend somebody's retirement money and not pay it back. If the CEOs of a big corporation (like Enron or World Com) had taken all the money from their employees' pension plans and replaced it with a bunch of worthless stock options or worthless IOUs, they would be headed to jail.

In the alternative, is it right to maintain tax cuts for the rich and pay back the retirement money borrowed from the social security trust fund by passing the entire cost of doing so on to the next generation - something the 1983 reforms were intended to avoid?

My personal view, is that we should immediately roll back all of the Bush Tax cuts, and then roll back every other tax cut for the rich that has been enacted since President Reagan until the operation of the government is fiscally sound. President Bush believes it is more important to maintain his tax cuts because they have a stimulative effect. - But crack cocaine also has a stimulative effect and that doesn't mean it is a good thing.

In order to take the high moral ground on this issue, Democrats must recognize that they had a hand in creating the big deficits of the past 23 years. Both parties have been buying our votes with borrowed money for far too long. But in any event, the press and politicians have an obligation to explain to the public that it is not social security but the rest of the government that needs reforming. Neither the Democrats nor the Press have done their job.

Answer 2

Yes, we have. I am 44, so I am probably not any better off than you. What we need to do is educate people about the issue. There is no reason at all that an average-earning or wealthy American should need Social Security benefits. I will have provided for my own retirement by 20 years from now. We need to be honest: Social Security is Elder-Welfare--it is the young working to support the old. We need to take responsibility for our own retirement, and make Social Security a minimal benefit only for the truly poor. With the savings in payroll taxes the rest of us will be able to provide for much more comfortable retirements ourselves.

Medicare is even worse--we need to get the government out of health care, or by the time I need it it will really suck (shortages of doctors and nurses, long waits for standard care, lower quality of care than now, etc.), and you will go broke paying for it. What is different about medical care that it cannot be provided by the market like everything else? (Please don't say it's because it's a necessity--food is a necessity, even more than medical care, but it has continued to get more abundant, more varied, of better quality, and less costly because of market competition.)

Answer 3

We'll muddle through, it actually won't get as bad as people sometimes think. The US cannot ever be in as bad a fiscal situation as Japan has been in every day for the past decade, and they muddle through.

However, Social Security/Medicare as it's conceived is an awful and terribly short-sighted system. Corporations have been learning how painfully stupid defined-benefit pensions are, and the nation as a whole will learn the lesson too, that's inevitable. It's an outmoded, early 20th-century socialist construct that will be radically changed after the boomers have died off (or hopefully sooner but don't bet on it) and the rest of us have suffered the financial pain of throwing our money down the toilet for a couple decades.

Answer 4

My whole life, I've been told that social security won't be around. I too have the IRA's and savings to watch over me.

What's going to suck is when those who didn't grow up with the thought that social security won't be there. Then we will have to take in our grand-parents, parents, aunts and uncles with alzeimers or let them live and die on the streets.

Sad thing is the cure is so simple. This socialist generation has accumulated much wealth. The proper thing to do is to increase the "Death Tax" so that the socialist baby boomers and hippies can take care of themselves. However, this group also is heavily into "Wills", "Trusts", and keeping the money they acquired within the family. Sure, this is good, however, this penny-pinching bunch are hording money and still crying "I'm poor" - give me free drugs ... "I'm poor" - free health care for all ... "I'm poor".

Now imagine if the major stock holders of "Walmart" had to pay 50% inheritance tax. Sure Walmart might go bankrupt and stop business ... but this means a new person/group can make another means of retailing. America is against Monopolies & Oligopies ... this allows for competition.

I don't think Paris & Nikki would seriously be financially hurt if they only got 60% of their family forturne. In fact, these are smart women who'll be rich even if they didn't get a penny ... and I don't see them wanting with their whole heart to carry on the family business of running Hilton Hotels. So what's wrong with letting turnover in the commerce???

Answer 5

I have zero faith that social security will be around when I retire, and I'm 36. I feel for ya because I think you're REALLY gonna be screwed out of it. Bush already wants to up the retirement age to 75, no doubt in hopes most of us will keel over before we reach that age. Since the ss funds earn pretty much ZERO interest (a savings acct at your local bank would earn more) there's simply no way for it to last.

Save all you can, make sure you go into your golden years with a home that is paid for and a good solid vehicle that is paid for, and knock on a lot of wood.

Answer 6

not completely genuine. the government has 2 retirement structures. The older device exchange right into a miles better deal for workers (yet value the government too lots) and did not comprise social protection. The greater present day device, those employed on/after 1983 (i think of) do pay social protection. This includes politicians and civil servants.

Answer 7

No, i am 19 years old, and i've just told myself to not trust the U.S. government with my retirement. i already started a Roth IRA and making sure i keep enough money in my assets and my savings account so i do not need to EVER tap into my IRA.

as a country i do believe we are screwed fiscally, doesn't mean that individually we do.

Answer 8

Well, anyone that puts all their faith in social security to provide for them when they get to retirement is in trouble. Hence the proposal to have more control over your money if you so choose, and put the money into things that have a possible greater return. To bad there's so many dunces out there that kept it from happening.. boy I love barely making a profit with all the money being stolen out of my paychecks!!!!!!!

Answer 9

here is the secret we let a bunch of illeagals into the country and let them all work under someone elses SS number, they will never be able to collect, so we the good citizens can benifit from social security.

Answer 10

Yep, you got it.
The AARP needs to change its slogan to:
"Taking your money til the die we die."
.