Retirement Income: Social Security and the Baby Boomer Burden - Essay Sample

Introduction

Having enough money at retirement is everyone's goal. Without employment income, social security is the ultimate solution. Social Security in the united states is one of the best sources of income for the elderly. The program also benefits people living with a disability. The increasing number of baby boomers turning the age of 65 adds to the burden of social security. This trend has recently brought uncertainties concerning the future of the social security fund. Over 60 million Americans depend on social security for the benefits of retirement, disability, and survivor. Each year, the program costs over 1 trillion dollars. Social Security was designed to replace about 40% of the income of workers in retirement (Schnaubelt, 2018).

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Some potential challenges and solutions are facing Social Security. The problems are the factors that will influence the future of social security. As indicated earlier, over 60 million Americans receive some form of social security, and the number of people depending on this source of income is only increasing as more people are turning 65 years. This trend has led to the question of whether social security will remain a dependable source of income in the future. Reforms are needed to be made to ensure that the program will continue to run smoothly without the possible reduced funding (Schnaubelt, 2018).

The recent government estimates indicate that if no changes are made to the system, by the year 2034, the program will be unable to pay for every dollar saved. The beneficiaries would be receiving 25% less of their deserved income, and the trend is expected to continue in the coming years if nothing changes. Initially, the Social Security Trust Fund would accumulate more than it spent every year. This was the intention of the Greenspan Commission. The changing demographics like increasing the adult population reduced birth rates, and longer life spans have caused depletion of the reserve of social security. This is happening quickly, and the crisis created needs quick interventions for mitigation (Schnaubelt, 2018).

Although social security may not disappear, the program will be unsustainable due to a lack of balance between the injections and payouts. Increasing expenditure than what is saved in the reserves will cause a situation where people will be earning less than they deserve or expect. Initially, the Social Security program intended to ensure that the current worker generation pays for the benefits of those who have retired. However, the number ratio of workers to retirees has fallen in the last two decades. By the year 2000, the ratio of current workers to retirees was 4:1. By the year 2017, the ratio was 2.8:1. By the year 2035, this ratio is expected to fall further to 2 workers per beneficiary (Schnaubelt, 2018).

Another issue that is facing the Social Security Trust Fund is long term insolvency. This exacerbates the threat of reduced benefits, increased taxes, and increased borrowing from other areas of public spending. This will further create more problems with the economy. While the program will not be gone completely, the benefits will fall about three-quarters of what is promised to the retirees when the reserves of the social security fund are exhausted (Schnaubelt, 2018).

Since the future is uncertain, the government needs to come up with a solid plan that will consider both the unknown and the known. Those planning for retirement also needs to take measures that will help avoid the risk of reduced benefits. Current employers need to acquire financial advice to come up with a sufficient savings and investment plan. This will help ensure that they do not entirely depend on social security for the majority of their income when they retire (Schnaubelt, 2018).

Other measures that the government can take include changing the earliest eligibility age, which is currently at 62. The full retirement age also ranges between 66-67 years. Changing the age requirements will help reduce the amount of money paid to individuals for the rest of their lives. More changes may impact adjustments in the cost of living, payroll taxes, and benefits based on the income level. For instance, the social security trustees estimate that raising the combined payroll tax from 12% to over 15% will help in fully funding the program for the next 70 years.

The problems and challenges that surround social security and all the uncertainties that come with it can be fixed. This can be achieved through changes that will shape investment and savings strategies, increasing the age of retirement and the minimum qualification age for social security eligibility, and raising the income taxes that are meant to ensure the reserves do not get depleted. Reducing the benefits will also ensure that the program as a source of income stays reliable for a long time, resulting in a permanent effect that will extend more benefits to survivors (Boskin, Perez & Bennett, 2019).

People pay taxes throughout their employment period for the benefits of social security. Due to the current uncertainty, it is essential to evaluate the effects that social security savings and investment plans have on income. This will help individuals in making the right decisions that will ensure they benefit more when they retire. Also, supplementing the social security fund by investing in other retirement income sources will help prevent the pressure exerted on social security (Boskin, Perez & Bennett, 2019).

References

Boskin, M. J., Perez, D. J., & Bennett, D. S. (2019). The Political Economy of Social Security Reform (No. w25985). National Bureau of Economic Research. https://www.nber.org/papers/w25985.pdf

Schnaubelt, C. (2018). Social Security: Past, Present And Future. Forbes. Retrieved 5 May 2020, from https://www.forbes.com/sites/catherineschnaubelt/2018/05/30/social-security-past-present-and-future/#2661314859ab.

Bb Collaborate. Us.bbcollab.com. Retrieved 5 May 2020, from https://us.bbcollab.com/collab/ui/session/playback.