The Future of Social Security
The future of Social Security will be among the top issues in the 2016 presidential election. Ferrara, who has been writing about Social Security since the 1980s, thinks the time for reform is fast approaching: Under what the government’s actuaries call “intermediate” economic assumptions, the [Social Security] trust funds will be able to [pay promised benefits] until 2033. After that, paying all promised Social Security benefits will require increasing the payroll tax by 50%. Under what the government’s actuaries call “pessimistic” economic assumptions, the Social Security trust funds will run out of money to pay promised benefits by 2029. After that, paying all benefits promised to today’s young workers will require doubling the current payroll-tax rate.
- Authors / Editors:
- Peter Ferrara
- Dec. 2015
The root cause of the problem, Ferrara writes, is Social Security’s “pay as you go” structure. Social Security taxes paid by workers today are not saved and invested for their future retirement, but rather used to fund others’ current retirement. Demographic changes – the Baby Boom and baby bust, for example, and longer life expectancies – make the pay-as-you-go system unsustainable.
Personalized investment accounts are the answer. Ferrara describes how those accounts would survive financial crises and how the transition could be made without harm to current retirees and those near retirement.