Was Social Security Doomed From Its Inception?
Question: Was Social Security doomed from its inception as it began by paying benefits to a generation that had never put anything into the fund?
Paul Solman: No. It is a pay-as-you-go system, meaning future generations pay for current retirees. When those future payers retire, the next generation pays for them. And, as Kurt Vonnegut Jr. would say, so it goes. The great fear has been that as fewer workers support more and more retirees, the system will collapse, meaning benefit cuts and/or higher taxes.
But Social Security is not doomed, even under the unfavorable demographic regime of the Baby Boom.
Suppose boomers continue to work well past retirement age. That’s what I plan to do. So too do many of the people I know. Some, because they can’t afford to retire – or don’t think they can. Others because they love their work, or can’t think of what else to do, or both.
But whatever the reason, if lots of Americans keep working, they’ll keep paying into Social Security. Even as they draw out of it. They’ll help right the imbalance. Add to them an immigration policy that brings more young workers into the country, and your further relieve the pressure.
Then make a few tweaks, like extending the age at which benefits can be taken, last extended in 1983. (My retirement age was upped from 65 to 66 that year.) Boost the ceiling on which you pay a percentage of your income for Social Security, currently $106,800. Why shouldn’t it be one’s whole income, for example? That would raise billions right there.