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The Future Financial Status of the Social Security Program

Social Security is at the center of many current debates, with many politicians and citizens arguing that the program will become unsustainable in the near future. When looking at the program, it is important to look at the past figures and the present to get an understanding of the future of the Social Security Program.

One useful way to look at the change of the program overtime and the effects of the changing workforce population is by comparing the ratio of beneficiaries to workers from the past and present. For the past few decades, there have been approximately 3.3 workers per beneficiary; however, according to future projections, by 2030, there will only be approximately 2 workers per beneficiary.

According to statistics provided by the Social Security Administration, with the average worker benefit at around $1,000/ month, each worker needs to provide around $300/month in order to meet these needs; however, with future ratio projections at 2 workers per beneficiary, each worker will need to provide $500/month in the future to continue to meet the needs of the beneficiary, under current standards.

This is largely a result of the “Baby Boomer” generation starting to retire, resulting in an increased retired population, with a smaller workforce. As illustrated in the figure below, the increased fertility in the 1950’s and 60’s resulted in the baby boomer generation; Due to their current retirement and the decrease in the workforce due to the slowing of fertility rates from 1970’s onward, we are experiencing a decrease in the worker to beneficiary ratio, thus creating a dilemma with the Social Security Program.

It is important to realize that some form of change is necessary moving forward in order to save the program. Furthermore, it is important to realize that this issue is not specific to Social Security, but that the change in demographics affects many other government sponsored programs, such as Medicare.

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  1. ghimirer17 ghimirer17

    I like how you mentioned that it is not just social security that is going to be affected by the changing demographics that we’re seeing and will expect to see in the future. Health care has been a big issue in my mind, especially given that we have a large proportion of the population (the baby boomers) who are aging and will need medical assistance in addition to the money needed to be able to survive (day to day expenses). Specifically, I worry about the costs of pharmaceuticals which continue to keep rising in the United States as opposed to other countries – how will this impact our elderly populations and the economy as a whole?
    There seems to be a lot of changes that needs to be made both on social security as well as medicare as you mentioned. My biggest questions are what are the alternatives to the current unsustainable system that we have now and how do we get these bills passed when it seems like there is so much political disagreement?

  2. These demographic changes can (are!) predicted well in advance. However, many components of our system of support for older Americans were not set up with rules that could be adjusted absent new legislation. The last big social security revision took place in line with the report of a bipartisan commission that provided “cover” to both political parties. But as long as the day of (political) reckoning is still 15+ years in the future, there’s little incentive for politicians to act.

  3. santanagarcesk17 santanagarcesk17

    Since these figures could be predicted at the very least by economists, why hasn’t there been a substantive push for reform? While things on Capitol Hill aren’t always effective or timely, these social programs are people’s livelihood and any further delays could hurt millions more people. At the very least, congressmen and senators who care about re-election should at least try to protect their constituents since the older demographics are the only consistent voters.

    • dawejko dawejko

      Agreed. It makes sense for them to campaign on that platform… unless they have no idea how to fix it (which is what I expect)

  4. ellingerw17 ellingerw17

    It is amazing that a lot of this data has been predicted and published well in advance, yet no change has been put in place to help the struggling system. I definitely feel that it is not because of a lack of proposed revisions, but rather, that we cannot get bipartisan support for any proposed “solution”. Changes to the system are needed, and are not going to be easy, as many people will not be happy with the reform that is needed, and I feel as if politicians are just trying to look the other way and let someone else deal with it in the future.

  5. wedmonds wedmonds

    I agree with the comments above–it is frustrating to see the political system inhibiting many of the changes needed to solve the problems of our social security system. I fear that Congress will soon raise the full retirement age and raise the earnings cap as a quick and easy solution to this obvious problem–which, of course, has serious consequences for our generation. Until then, I hope that politicians can move beyond their party affiliations, and open their minds to reasonable, long term, bipartisan solutions.

  6. lancer17 lancer17

    If taking the political approach, is it possible that politicians are afraid of taking a reformation position? The baby-boomers clearly make up such a large voter base, and I don’t see how any reform to the current social security plan could directly benefit them individually. How gung-ho can a politician be if his constituency if largely based on baby boomers?

  7. dawejko dawejko

    At this point I feel like the situation is past a partisan decision; regardless of your political party everyone can clearly see the situation is unsustainable. Reforming social security must be done and if it isn’t then I think it will be a clear sign that the United States government is broken. I hope it doesn’t come to that, but like I said in another post, Congress could easily redirect some of the military expenditure to social security and at least buy the system some time.

  8. The House was designed to have a short time horizon, the Senate with longer, staggered terms to offset that. It is still many years more than six until older Americans are looking at an automatic cut to their monthly Social Security bank deposit. Cuts are impossible, revenue enhancement will be put off until the last minute.

    Note that when V-day (vote day) comes, extending the full retirement age is not a “fix” because any change in the rules would likely be phased in over a period of years. In addition, the older that age is, the more it will be offset by disability payments (a piece of the system we mentioned only in passing), and so the smaller the benefit of more years of collecting social security taxes and fewer years of paying out pensions. The only option will be a combination of raising tax rates and expanding the tax base (such as removing the ceiling – for 2017 no tax is due on income above $127,200).

  9. cohend17 cohend17

    I agree (again) with many of the points that have been made. It definitely seems like there will be several more election cycles until this will seriously be addressed; it will be last minute. It has occurred to me that the nature of such a solution might depend solely on the political party in power. If the GOP has control in the early 2030’s, when the situation will be more urgent, I would suspect substantial other programs will be cut to ensure that a greater portion of the budget will go towards social security, without needing to significant of a tax hike.

    • But unless the Dept of Defense is cut, nothing will be big enough – the non-defense component of the Federal budget is simply too small, despite what political rhetoric implies. The DoD however has seen to it that there are military installations in a large number of Congressional districts and most (if not all) states. What politician will vote to eliminate a base in their district? [Note: bases have been closed, so there are ways.]

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