Greetings gentle reader. Once again, it may be covid related but the demise of Social Security as we know it is being bandied about in the news. The headline on MarketWatch-“Should Social Security be eliminated as a federal entitlement program? Or would that ‘end the program as you know it’? by Alessandro Malito. Or just the opposite– “Social Security recipients to receive major COLA benefit increase” on NBS news.
So which one is it? There’s reports everywhere that the cost of living(COLA) will increase the payments for all recipients because of the rampant inflation we’re all experiencing and in the same breath there’s reports about the trust fund reducing benefits as early as 2035. How can we increase benefits right now while simultaneously be forecasting the trust funds won’t have the cash to keep paying without reductions? The year 2035 isn’t that far away. Record levels of COLA increases isn’t going to help with the longevity of the program. There are lots of fixes out there as actuaries, financial pundits and politicians throw out solutions like bumping up the payroll tax withholding figure, raising the max retirement age or raising the tax limit (147K for 2022). However, they all agree it needs to be fixed as the boomer population retiring soon will put stress on the system and could reduce the trust fund significantly even though the generations paying in could be earning more income. Whatever the fix will be, I never see anything saying the payments won’t be taxed anymore as first intended by the Roosevelt administration back in the 1930’s. Not surprised by that; I know you’re probably not either.
Why is there a strain on the system? A lot of experts say it’s the “baby boom” generation and they’re probably right; almost 76 million people in the US. Let’s go with that premise. The boomers were born from 1945 to 1965 with the “max years” being from 1954 to 1964 where there were the majority of boomers born-around 46 million new kids. This is a very important group that will need to be paid their Social Security benefits as they are just now in 2022 turning 66 years old.
U.S. Births 1930-2007
| Year | Births |
| 1930 | 2.2 million |
| 1933 | 2.31 million |
| 1935 | 2.15 million |
| 1940 | 2.36 million |
| 1941 | 2.5 million |
| 1942 | 2.8 million |
| 1943 | 2.9 million |
| 1944 | 2.8 million |
| 1945 | 2.8 million |
| 1946 | 3.47 million |
| 1947 | 3.9 million |
| 1948 | 3.5 million |
| 1949 | 3.56 million |
| 1950 | 3.6 million |
| 1951 | 3.75 million |
| 1952 | 3.85 million |
| 1953 | 3.9 million |
| 1954 | 4 million |
| 1955 | 4.1 million |
| 1956 | 4.16 million |
| 1957 | 4.3 million |
| 1958 | 4.2 million |
| 1959 | 4.25 million |
| 1960 | 4.26 million |
| 1961 | 4.3 million |
| 1962 | 4.17 million |
| 1963 | 4.1 million |
| 1964 | 4 million |
| 1965 | 3.76 million |
| 1966 | 3.6 million |
| 1967 | 3.5 million |
| 1973 | 3.14 million |
| 1980 | 3.6 million |
| 1985 | 3.76 million |
| 1990 | 4.16 million |
| 1995 | 3.9 million |
| 2000 | 4 million |
| 2004 | 4.1 million |
| 2007 | 4.317 million |
This is simple math but we are projecting the likelihood that most of these folks will elect to take their benefit at the FRA(full retirement age) which in this case between 66 and 67.
| Birth Year | Year taking first check | Year turning 85 |
| 1955 | 2032 | 2050 |
| 1956 | 2033 | 2051 |
| 1957 | 2034 | 2052 |
| 1958 | 2035 | 2053 |
| 1959 | 2036 | 2054 |
| 1960 | 2037 | 2055 |
| 1961 | 2038 | 2056 |
| 1962 | 2039 | 2057 |
| 1963 | 2040 | 2058 |
| 1964 | 2041 | 2059 |
Life expectancy for most people living in the US right now according to the census tables is 85 years old let’s say and that’s rounding up just to make it interesting. The 1945 boomers are turning 85 by 2030 and the majority dying off. Not trying to put anyone in the grave; this is just an article about Social Security–don’t get excited please. So 2030 is when the Social Security rolls start to theoretically start to drop off. The bulk of these payees are putting a REAL strain on the system between 2032 to 2059. In 2060, the 1965er’s will be 85 and dropping off the rolls.
Theoretically we really just need the bail out to last between 2032 to 2060, right? Then we’re done with the boomers and the population that is eligible would be less ergo putting less of a strain on the system. So a cash infusion or some rule changes to get the trust fund fatter during this time would be optimal but as described above, may be for only a short time– 28 years compared to how the program has been around since 1935. Gen Xers birth rates are much lower through the sixties, seventies and eighties. In the 2000’s the birth rates do increase so there will be more youngsters paying in to cover the smaller Gen Xer crowd. Then again there’s longer life expectancies to think about–fantastic medical science, cure for cancer, bionic transplant body parts, better diets (fat free mayonnaise? Just give me the real stuff!) and exercise are key contributors.
Of course, not all of the boomers in question will make it to 85 as life’s misadventures, health issues etc. can figure in. Also, there should be some leeway with regard to those who take their benefits early or later. Additionally, there are surveys out there that state many people will continue to work into retirement which means they would be still subject to the payroll taxes that fund the program that would help support the benefit payouts.
The broad brush I’m using here is just that but when the problem is truly dissected and the numbers are broken down, it can change the perspective on when a bail out or other remedy is truly needed. I’d like to think this endless diatribe has helped ease whatever anxiety you may have by shedding light on these stats. Until next time, gentle reader, I hope this helps you live your best life in retirement.
Jeff Dragon 