Dear Editor:
Sometime last month you probably saw news reports about the Social Security trust funds. In those reports, you may have read that tax revenues will fall below program costs in the year 2018, and that the Social Security trust funds will be exhausted by 2042.
“This report is yet another reminder of what we have known for some time, Social Security’s long-term financing problems are very serious and will not be fixed by wishful thinking alone,” said Jo Ann Barnhart, Commissioner of Social Security. “I want to assure those already receiving Social Security benefits, as well as those who are close to retirement, that your benefits are secure. But doing nothing will have serious consequence for our children and grandchildren,” she added.
Because the news reports might have piqued your interest about the subject, I thought it might be a good idea to give you a little background how Social Security is funded. Today’s Social Security taxes pay the benefits of today’s retirees. Money in excess of what is needed to pay today’s benefits is invested in special issue, interest-bearing Treasury bonds. This system works well when there is a relatively high ratio of workers to beneficiaries. For instance, in 1965, there were four workers for every Social Security recipient.
But the demographics are changing. People are living longer. The first baby boomers are just five years from retirement. The birth rate is low. Today, there are 3.3 workers paying Social Security payroll taxes for every one person collecting Social Security benefits. That number will drop to 2-to-1 in less than 40 years. At this ratio, there will not be enough workers to pay scheduled benefits at current tax rates.
The Trustees Report indicates that the sooner the long-term funding challenges facing Social Security are addressed, the less abrupt the changes will have to be.
“Social Security’s retirement, disability and survivors’ components touch the lives of nearly every American family,” Commissioner Barnhart stated. “For the sake of our children and grandchildren, we must come together to meet the challenges facing this vitally important program.”
The 2003 Trustees Report can be found at www.socialsecurity.gov/OACT/TR/TR03.
Yvonne Bryant
Social Security Manager, Jersey City