Today’s Bloomberg/WAPO article is kind of old news since Social Security went “cash negative” last year. I guess the story is that everyone is still politely ignoring it. That mythical social security lockbox was emptied long ago to “lend” money to the federal government. Now the feds are supposed to start paying it back. But even if (when! when!) they do, there are certain numerical realities. To wit: Social Security is a cash transfer program. A working person pays in, a retiree takes out. But with the aging of the baby boomers, there are now more people pulling from the system than paying into it.
Americans are living longer. When Social Security was originally created in the 1930s, it was not designed as a retirement program. Payouts began at 65 but the average life expectancy was 63. Today, more and more people are living into their hundreds. Last year at an insurance course I had to take (shudder) we were informed that actuaries were projecting today’s eight year olds would live into their 130’s. It seems clear to me that the date when Social Security payouts begin needs to be moved back. Imagine someone who goes to college, enters the workforce around 24, retires at 65 after a 41-year career, and then lives until 95. That means that person will have been not working for more years than they worked. Nice if you can afford it – not so great if it’s on the taxpayer’s dime.
That said, insurance companies have these things called annuities where you pay in regularly, and they give you a guaranteed payout for life or a certain number of years. They’re able to do this because they invest the money and hedge their bets. So it is possible to get a long retirement payout – just not the way Social Security is currently structured. Of course, this would require some of that evil capitalism so privatizing Social Security at any level is probably a no go. Unfortunately.