For those who save for their retirement, what they save is what they get. For those who depend on Social Security income for their retirement (most people do both), the story is different. Social Security is a pay as you go system. While working, people (shared with their employer) pay a SS tax and once retired they receive a legally fixed income (defined benefit). The system works ok as long as there are enough workers paying the tax to finance the benefits received by those retired. “Saving Social Security” “What to do about Social Security”
But American’s are living longer than they did when the SS system was designed. Without any change in their retirement age they will live in retirement longer. In 1975 there were 3.2 workers (paying the SS tax) per retirees receiving SS benefits. By last year this had fallen to 2.8. Over the next ten years this ratio is projected to fall to 2.3. The simplest solution to the shortfall of taxes paid into the Social Security Trust Fund for financing its benefit payments to the retired is to raise the retirement age. Most of us want to work longer anyway. A new extensive study of these issues and the experiences of some other countries will be available in a few weeks. “Reimagining Social Security”
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