Baby boomers are that huge demographic that came of age in the 1960s and 1970s. Totaling 76 million, Baby Boomers were born between 1946 and 1964. This vast cohort began to reach age 62 in 2008. By 2031, the youngest boomers will have passed full retirement age of 67. There’s a lot of talk about whether the baby boomer generation will bankrupt Social Security. Before you panic, let’s look at the facts.
According to The National Academy of Social Insurance, Social Security costs are projected to remain relatively steady due to the increase in the full retirement age and other Social Security cuts put in place in the 1980s. During the 1970s, 1980s and 1990s, the government made substantive changes to the Social Security system. This large program remains on the governmental radar, which is well aware of the Social Security reserves.
Currently, there is a large Social Security surplus. The Social Security Administration stated in "Social Security Trust Fund Cash Flows and Reserves "(Social Security Bulletin, Vol. 75, no. 1, 2015) the following: “In 1980, the OASDI trust fund reserves were low and declining. Congress enacted changes in 1983 that enabled reserves to begin to accumulate. In the 2014 edition of the Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds, reserves are projected to peak around 2020 and to be depleted around 2033 if no changes are made to the tax or benefit provisions before then.”
Once those reserves are depleted in approximately 2033, an estimated 77% of the expected Social Security benefits will continue to be paid from the government’s tax revenue. These projections have remained constant since 1987 and are believed by experts to be quite reliable. Yet, we’re still looking at a declining Social Security fund beginning in just four years. So what is the possibility that baby boomers will bankrupt the Social Security system? (For more, see: How Baby Boomers Will Change the Way Others Retire.)
There’s clearly cause for concern. After all, 2033 is less than two decades away. Yet this is not a "surprise" issue. Since Feb. 1, 2016, there have been 16 proposals reported by the Social Security Administration currently in various stages of review by the U.S. government – many of which suggest increasing the normal retirement age. The full retirement age for Social Security benefits is already scheduled to rise during the coming years from age 65 to age 67 for those born in 1960 and later. This makes sense given lifespans have drastically expanded since Social Security was initiated. Another proposal recommends raising the normal retirement age to 69. This initiative advocates that starting in 2022, the age would rise by three months each year until it reached age 69 in 2030. Another proposal is entitled longevity indexing. Since Americans' life spans continue to grow, it seems reasonable that Social Security payments should adjust. The indexing would continue benefits for a longer time period and offset this extended lifespan duration with smaller monthly benefits as lifespans grow.
There are a variety of versions of this type of adjustment. Some years ago, entitled longevity indexing was proposed as a solution. Since Americans' life spans continue to grow, it seems reasonable that Social Security payments should adjust. The indexing would continue benefits for a longer time period and offset this extended lifespan duration with smaller monthly benefits as lifespans grow. There are a variety of versions of this type of adjustment.
The Bottom Line
The looming Social Security shortfall is front and center in both the public and legislators’ collective agendas. There is no reason to believe that the baby boomer generation will bankrupt Social Security, as it is one of the most prized social programs. History confirms that the program was amended with regularity during the recent past. Social Security's solvency and benefits are currently under review.