Social Security: Retirement income for all generations
Pensions and personal savings provide nearly 40 percent of all income for older Americans, but Social Security is the most prevalent and important single source of income for retirees.
In 1950, there were 16 workers per retiree; today, the ratio is less than four to one, and by 2030, it will be two to one. The declining worker-retiree ratio has traditionally led to higher payroll taxes to cover the revenue shortfall. If policymakers were to continue that approach, payroll taxes would need to increase from 10.3 percent to 18 percent in 2030 simply to cover costs. When Social Security was created in 1935, the average American’s life expectancy was 61 years, but that figure is projected to rise to 80 years by 2030.
As increasing numbers of retirees claim Social Security benefits for a much longer period than the system’s sponsors originally envisioned, and fewer workers are available to support those transfer payments, the resulting strain on the Social Security system threatens to bankrupt the program.
To avoid a generational mismatch among baby boomers, generation Xers, and echo boomers, who may have to pay more taxes to sustain today’s level of retirement entitlements for baby boomers and future generations, Congress must reform Social Security without further delay.
Any restructuring should be bipartisan and based on principles that preserve the broad intent of the original system.