Future Generations Will Pay a Huge Price If Changes to the System Are Delayed. Disability Lawyers News Room.

No one should have been surprised last week when the General Accounting Office warned that the Social Security system is in danger of running out of funds.

That fact has been known for years, but Congress continues to ignore the situation.
GAO investigators said Social Security benefits would have to be cut by nearly a third by 2039 if no changes are made to the system. An alternative to cutting benefits would be increasing payroll taxes 46 percent.

Neither option is very palatable, but delaying the tough choices won't make it any easier.
The simple fact is that the baby boom generation, which is quickly approaching retirement age, will swell the beneficiaries at a time when the labor force is declining.
Last year, 46 million people received Social Security checks. By 2020, the number of beneficiaries will exceed 68 million. But the labor force still paying into the system is expected to start declining in 2010 and be less than a third of what it is today by 2025.
To put it another way, in 1950 there were 16 workers paying into the system for every retiree. Today, the ratio of workers to beneficiaries is 3.3 to 1. In 40 years, it will drop to 2 to 1.

At the same time, life expectancy is increasing. When Social Security began in 1935, life expectancy was about 60. It's more than 76 today, so beneficiaries are receiving benefits longer.

To help offset that, the age for receiving full benefits is gradually being increased to 67, but even with that adjustment in place Social Security expects to have a negative cash flow by 2018, meaning it will be paying out more than it will be taking in.
Social Security officials assure current and near retirees (those in the 50s) that their benefits won't be affected, but those of younger generations will be affected unless something is done.

Besides the options already mentioned -- raising payroll taxes or cutting benefits -- possibilities include transfers from the general fund and setting up personal savings accounts or allowing direct investment options.

It's often said that Social Security was never intended to be the main source of retirement income. Rather, it was designed to supplement personal savings and other pension plans.
The reality, however, is that some workers can't afford to put much back in savings, and many companies have used the crutch of Social Security to avoid offering pension plans for their employees.

In recent years, 401(k) plans have become popular, often replacing traditional pension plans, but the aftereffects of 9-11 have shown how thin that cushion can become.

Even the current low interest rates -- a boon to borrowers -- are pinching many retirees.
Granted, Social Security is a political hot potato, but it still needs to be handled. The looming problems aren't going to go away, and the sooner they are addressed, the less drastic the solution will have to be.

Congress needs to put politics aside and get serious about fixing not just Social Security, but also Medicare, which also depends on payroll taxes and is affected by the same problems.

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