Feature
The Millennial Perspective
Social Security won’t be there for today’s twentysomethings. Yet their piggy banks—and 401(k)s—remain empty.
James Piereson
A Time for Choosing
Rep. Paul Ryan
Empowering Individuals or Bureaucrats?
Stephen Moore & Peter Ferrara
The Road From Serfdom
Former U.S. Senator Alan Simpson described them as “the greediest generation.” He was referring to elderly voters keenly opposed to reforms needed to keep Social Security solvent. In typical flamboyant style, the Wyoming Republican also compared the entitlement program to a milk cow “with 310 million tits.” Now there is a word picture.
With an estimated 10,000 new baby boomers qualifying for Social Security each day, the milk will soon run out. In the coming years, my generation, the Millennials (born from the 1980s through the mid-1990s), will bankroll a retirement scheme for our elders that we ourselves will never participate in, at least not in the same way. A steadily declining birthrate fed by abortion on demand, a swiftly graying population, an extended average life span, and unsustainable national spending have created a perfect storm for Social Security and set the stage for a titanic generational war.
The armies are equally strong in population. Millennials—also known as Generation Y or echo boomers—are roughly equivalent in number to boomers (born in the post-war years of 1946 to 1964). boomers have paid into Social Security throughout their working careers and feel entitled to the promised benefits. But we Millennials also feel entitled to keep the fruits of our labor and are hesitant to pay into a system that likely won’t be around when it’s our turn to retire.
Although equal in number, the two generations are far from equal in political power. Millennials are just now entering the political and financial world, while boomers command the top echelons of society. Millennials might determine what’s trendy in music and fashion, but boomers pull the strings of power. (Their clout is shared with some members of Generation X, born from the mid-1960s through the 1970s, and the Silent Generation, born during the Roaring Twenties through the Great Depression and World War II.)
As a result, the will to implement meaningful reform of Social Security has been absent. Those who have retired, or are nearing retirement, don’t want to see their benefits affected. The end result of inaction is clear: The Social Security Trust Fund will go bankrupt by 2037. Accordingly, Millennials will pay into a system for decades but see no benefits (at worst) or reduced benefits (at best).
The generational fleecing isn’t confined to Millennials. Generation X, composed of those currently in their 30s and 40s, will see drastically diminished benefits as well. Thomas Firey, managing editor of the Cato Institute’s publication Regulation, made the point in an article published more than a decade ago. While young people now have 12.4 percent of our earnings commandeered by Social Security, boomers who entered the workforce in the late 1960s paid only 6.5 percent of their earnings to the entitlement. Even later, when the payroll tax was raised, Firey estimated that boomers paid around 10 percent during the latter half of their working careers.
“That’s the boomers’ bargain: They’ve paid less of their earnings into Social Security than we Gen-X/Yers, yet they’ll receive more in benefits than we will and we’ll pick up the tab,” Firey wrote. “And when we retire, there will be no money saved in Social Security to pay for our retirement, unless we pull the same scam on our children that the boomers are pulling on us.”
Given that reality, it’s a political wonder that Texas Governor Rick Perry was roundly criticized for calling Social Security a Ponzi scheme. Particularly for young people, that’s precisely what it is.
The result for my generation is an even worse financial picture than many have predicted. Millennials’ mentality of instant gratification, combined with a poor job market, means that we aren’t saving for retirement. Yet we won’t have two key retirement benefits—Social Security and pensions—that are available to older generations. In addition, the dearth of jobs means we are losing key earning and saving years that could go a long way toward alleviating the retirement debacle.
The news isn’t all gloom and despair. Millennials don’t have their collective heads in the sand on Social Security’s insolvency. A recent Pew Research Center report found that 72 percent of Millennials don’t expect Social Security to be their main source of retirement income, and 42 percent don’t think they will get income from the entitlement at all. That’s why Generation Y is far more willing to support an overhaul. The same Pew survey found that an overwhelming number of Millennials, 86 percent, support reforms that would allow them to invest their Social Security contributions in a private retirement account.
A clear indicator of their mistrust in government is that young people would rather invest their money in the up-and-down stock market than rely on the government to keep the funds safe and untouched until their golden years. Millennials support choice in Social Security, even as many boomers and members of the Silent Generation consistently resist it. As Generation Y gains more political clout in the coming decades, desire for more substantial reform will accompany it.
But there is plenty of bad news. Although Generation Y might acknowledge Social Security’s insolvency, we aren’t doing anything about it from a personal responsibility standpoint. Our spending, saving, and general financial habits are abysmal. For those in my generation fortunate enough to be employed, and fortunate enough to have an employer who offers retirement savings benefits, nearly three-fourths do not take full advantage of the matching programs, according to an Aon Hewitt study from 2010. Worse, Hewitt found that 60 percent of workers in their 20s cashed out their 401(k) accounts, and suffered the resulting penalties, when they changed or lost jobs.
On the spending side of the equation, 42 percent of people under the age of 34 have $5,000 or more in non-mortgage personal debt, according to a study published by Demos, a left-of-center think tank based in New York City. Two-thirds of college students graduate with debt, which averages $24,000. Another characteristic of Generation Y—that we delay marriage—also has financial consequences. Married individuals are healthier, happier, and more financially prosperous and stable than their cohabiting or unmarried counterparts.
The perpetually sluggish job market is doing irreparable harm to Millennials’ retirement prospects, too. The fundamental rule of compound interest is simple: Save early, safe often. A Millennial who begins planning in his early 20s must save less over time, and will end up with more in the bank at retirement, than a Millennial who waits until his late 30s. In 2011, an analysis by the online investment firm Scottrade found that 55 percent of Millennials have not started to save for retirement; only 21 percent are actively saving for their golden years.
About the Author
David N. Bass is a journalist who writes from the Old North State. Follow him on Twitter.
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MAC1000| 4.26.12 @ 12:37PM
I've got a plan for Social Security.
Give everyone back the amount they paid in, and THEN start means testing.
I'd also get rid of early retirement. Raise the retirement age to 70 unless you become disabled and raise the Medicare age to 70, too.
Getting rid of early retirement would be first. That seems like something that shouldn't be a huge hot potato.
Mike Stein| 4.27.12 @ 4:24PM
Increasing the full-retirement age certainly seems to be one of the more painless ways to help reduce the cash shortfall. I would support some modest exemptions for people not completely disabled, but physically unable to do the job they hold at age (say) 60. But realistically, this is no longer a nation of coal miners and factory workers. People are living longer and healthier lives. My mother worked part time as a registered nurse into her 70s, and my father is still working part time at age 84. It was never due to financial need, although the extra money allowed them modest luxuries. The primary motives were for the activity and the social contact. My mother still does a lot of volunteer work.
I'm 56, white-collar, and I enjoy my job. I currently plan to work until at least age 70, and quite possibly beyond. As long as my health holds up, I like what I'm doing, and my employer and I both feel I'm making a contribution, why should I stop working? Meanwhile, I'm stuffing the 401k piggy bank as much as I can. If push comes to shove, I'd rather means-test Social Security benefits than blindly cut across the board, even though I'm going to be on the losing side of that deal.
Health care for an increased number of elderly workers might be a thornier issue, given the actuarial realities of getting old. Employers may grumble at the cost of premiums for the increased number of workers in the 67+ group. But even if political realities force some sort of subsidy for employer-provided health care of elderly workers, it's still going to be cheaper than the complete support that Medicare currently provides.
TexasMom2012| 4.29.12 @ 4:38PM
I agree. We started saving in the late 80s because it was obvious at the time that SS was a Ponzi scheme on a massive and unsustainable scale. We would prefer to divert part of those SS taxes into a private account because we planned for the likelihood of SS's insolvency. Even with the tumultuous market in this milenium we are on target for a comfortable retirement and provision made for our kids as well. Would love the opt out. Then we would own the funds leaving more wealth for our kids inheritance. So only in conjunction with the end of the death tax!
Occam's Tool| 5.7.12 @ 11:50AM
I wish I could opt out. I have already paid maximum amount for 17 out of the last 19 years, and my benefits are therefore already maxed.
So now I am just paying for nothing more.
I work in a field where there is such a shortage that employers will want me when I am in my 70s, easily.
TLP| 5.7.12 @ 6:44PM
I have an idea.
Let's give everybody a FICA TAX HOLIDAY for a year.
That'll fix it.
Satch13| 5.5.12 @ 8:30AM
Hey, hang on to that fantasy that someone will want you when your past 70...or 65 for that matter. Maybe that delusion will continue to sustain you.
Satch13| 5.5.12 @ 8:32AM
Sorry, meant to reply to Mike "fantasy man" Stein.
Satch13| 5.5.12 @ 8:33AM
Sorry, meant to reply to Mike "fantasy man" Stein.
The great Satan| 5.2.12 @ 1:58PM
You obviously never worked for a living. I was a laborer all my working life, and barely made it to 62. Care to think how long a coal miner lasts? You might want to work on your empathy skills.
Tom Tuttle| 5.8.12 @ 7:44AM
Are you saying that, because you were a "laborer" all your life, there is a 30-year-old out there that owes you retirement income? Are you familiar with the word 'parasite'?
a| 5.9.12 @ 2:18AM
You are right. We should let him die of hunger together with all other no longer useful parasites. Anybody sick, old, too young and disabled should be left to fend for themselves. They are not useful right now, so they do not count as human beings.
a| 5.9.12 @ 2:25AM
He was paying retirement income for the previous generation while he was working. The previous generation paid retirement income of the one before that.
It is only current generation that is not willing to pay for anybody but themselves. Because, if you accuse them of being selfish and greedy, then you can keep your money. Which is the only thing that matters.
RickShelton| 5.7.12 @ 9:17AM
Mac, I would love to get back what I've had taken from my paycheck. The last statement I got from SSA showed they had confiscated over a quarter of a million dollars from me over the last 30 plus years. The truth is I will never see much if any of that money.
jbd010| 5.8.12 @ 9:47AM
"Give everyone back the amount they paid in" - Unfortunately for you Social Security has always been a pay as you go program, the money you paid in went to your parents generation. If you want your money back then I suggest you knock down Grandpa's door and ask for it. But to demand that your parents currently sucking the "milk cow dry" get the benefits they are currently getting and that you should get back the money they are spending is an absurd concept - the money can only be spent once.
It was not until Social Security almost went totally broke in the early 1980s and congress was forced to double the with-holding rate that there was ever a "trust fund". And the "trust fund" is nothing more than a surplus of incoming funds compared to outgoing fund - which is was used to buy treasury bonds pumping the money back into the government where congress could (and did) spend it without providing a way for that money to be recouped later without either a tax increase for future austerity measures - since it is now debt owned by the US government.
Though I sympathize with the Boomer generation when it comes to paying for your parents generation for something that can be cut off at anytime by your children's when it comes you turn. The fact of the matter is if you (as a generation) wanted to ensure you had social security for yourselves you should have A) had more children and B) been a steward of the country in such a way that allowed those "more" children to be gainfully employed and continue the system as it was for you. Instead we have a system where workers have demanded so much from employers that it is almost economically unfeasible to do business/produce goods in the US - so major employers have gone elsewhere where someone is willing to do it for a more reasonable price.
The bottom line is I would suggest that more folks follow the advice my mother gave me at 15 "...never put your fate in anyone else's hands, make sure you have yourself and your family taken care of first and then no one can ever hold power over you. Otherwise when you are forced to answer for others they will exact a price you may not be willing to pay"
WhiteBikerTrash| 4.26.12 @ 1:23PM
Social Security needs to be deconstructed!!
I was born back in 1957, I knew in the early 70s that there would be no Social Security for people my age.
It has been a Pozi scheme from the start and like any other Ponzi, it must collapse under it's own weight of promise!
My suggestion, Freeze all admission to SS. Freeze all benefits. Make an offer to all people born between Jan 1 1945 through Dec 31 1960 you receive all of your "contribution" plus 2% per year interest in one lump sum, or collect SS at the frozen level after you reach eligibility age.
You must sign up for one or the other.
Stop collecting SS Taxes.
Return all SS contributions to anyone born between Jan 1 1961 to Dec 31 1970.
66% to Jan 1 1971 to Dec 31 1980.
33% Jan 1 1981 to Dec 31 1990.
none returned to Jan 1 1990 and later. The Government is now out of the retirement business! The returned monies will be spent or invested. People will take responsibility for their own retirement, or not!
My napkin scribbling, with the information I have tells me that the final cost of this plan will be about 33 Trillion Dollars as opposed to the over 100 Trillion dollar obligation that SS currently carries.
The great Satan| 5.2.12 @ 2:02PM
Your "napkin scribbling" are worthless, based as they are on propaganda and mis information.
biomedlives| 4.26.12 @ 3:39PM
Don't forget that the generation before the boomers did very well by Social Security and particularly by Medicare. That generation paid relatively little into Medicare but reaped benefits far in excess of its contributions.
chrispaul| 4.27.12 @ 9:08AM
If you're going to blame abortion on the lack of young people to support SS, I think you should also mention what has temporarily kept it afloat: illegal immigrants who use stolen SS cards to pay into a system that they will never benefit from. Conservatives can think what they want about the "fairness"of illegal immigration, but you should also recognize the way you benefit from this permanent underclass.
I too am a millennial, but I also have parents and grandparents who I care about tremendously. We all realize that SS needs to be revisited soon, but we should come at the discussion with a broader-range focus, that is concerned not just about MY retirement, but about yours, my grandma's and my children's. The system would be totally solvent if we all just chipped in a bit more. You can choose whether feeding grandma is worth a tax hike, but ultimately it is a choice. Stop with the there's-no-choice-but-to cut-SS-because-we're-broke garbage. Let's have a real dialogue about whether our tax dollars should care for the elderly (and poor, etc) or not--and pray that when we reach retirement, our grandkids won't be as bitterly selfish as you appear to be.
TexasMom2012| 4.29.12 @ 4:41PM
I prefer to feed Grandma directly. Bypassing the Feds will have huge savings. Just closing the SS admin would save billions in overhead costs!
Satch13| 5.5.12 @ 8:36AM
Great thinking. Bypass the evil Fed so you can give it to your caring friends on Wall Street. DA.
SFC_Swede| 5.2.12 @ 1:26PM
Illegals received amnesty int he 1980's...and they are about to get it again. No matter what the majority feels...this will get done simply from a demographic point of view.
The great Satan| 5.2.12 @ 2:05PM
Thank you for creating an island of sanity in this lala land that is the spectator.
Realist| 5.6.12 @ 10:43AM
You look after your grandma. I'll look after mine. We'll fire the gang of bureaucrats now sitting between us.
Stephanie| 5.7.12 @ 10:51AM
Not every grandma has somebody to look after them. And it sounds like the article author's grandma is firmly on her own. You can rail on about personal responsibility all you want - and good for you and everybody else who walks the walk - but if you are a person of conscience and a rational thinking, you cannot ignore the fact that we do in fact have a problem of scale in our society. That problem is that there *are* significant numbers of people who, for whatever the reason, have arrived to a point in their lives where they cannot completely help themselves. It is our responsibility as a society to show compassion and help. Whether we help via government channels or through private efforts is not and should not be an either-or choice. It does not and should not be an all or nothing effort. If you don't like your tax dollars supporting somebody else's grandma, I've got a piece of news for you - unless you're in the wealthiest 1% of taxpayers - keep in mind that somebody else is paying for you and your grandma.
This article is terrible. Where do I start? The sweeping generalities applied to generations of humans who apparently are not disparate in values and views simply because they happened to be born in the same 10-15 year span?
It's not the withering funds of Medicare & Social Security that I worry about sitting here at age 36 - it's that we apparently seem to be getting too selfish and stupid as a society (keeping in the spirit of sweeping generalities) to figure out how to play nice with one another and implement a solution.
I do believe we're smart enough to develop good solutions when our collective feet are put to the fire.
Melissa| 5.7.12 @ 11:44AM
I agree....our generation, and those before us, seems to be too selfish and looking for others to blame for a lot of it. A century ago, the elderly, the handicapped, they lived with us in our homes. We cared for our family who couldn't care for themselves. Now, everyone gets put in an "assisted living facility" or nursing home or institution. My mother-in-law lives with us. My older brother, who has cerebral palsy and has lived with my parents his whole life, is moving in with us. The additional cost of supporting them under our own roof is a fraction of what it would be to institutionalize them, plus it's heartless (in my opinion). The cost of having nurses come by to assist is also a fraction of putting them in a home.
It really is about priorities and making smarter AND more empathetic financial decisions.
Stan Redmond| 5.13.12 @ 4:24AM
Grandma is going to have to push Julia aside from Obama's teet.
It amazes me how miopic a liberal's view of history is. Somehow, after all these years of living with other people we managed to take care of our own families and ourselves. All that is now thrown away with that big plump teet of the federal government because apparently some nameless faceless bean counter in DC can do such a better job then out own communities.
ssm| 4.28.12 @ 5:08PM
Where to begin? I am a late boomer ('57) and was well on my way to having that $1M+ nestegg when 2008 rolled around and half of my 401K was sent into oblivion to support a ponzi scheme known as the banking system (Ponzi because new debt is required to support old debt, etc. in any fiat currency system) So I get to sweat out another decade or two of work to try and prepare for when I won't be able to work any more, but I fear that the money will all be stolen again.
What we really need is for people who save money to be able to defer taxes indefinitely and no punitive penalties for withdrawing at any time - it just becomes a taxable event. The savings rate in this country would go through the roof and the economy would soar. Add to that some real accountability in Washington, and on Wall Street and health savings accounts, and we might have a chance of surviving 100+ years of financial insanity.
Unfortunately, our government will continue to grow until it collapses. There are really no leaders with the courage to admit that we need to have a government that is much smaller than what we now have.
So, prepare for barter, raise good kids and plead with them to take care of you when you become aged, stop supporting the two criminal political parties and vote for people who will really change things and we might survive.
I doubt it.
Satch13| 5.5.12 @ 8:38AM
Through the fog a voice of reason and experience. Thanks SSM.
Wxcynic| 4.30.12 @ 12:30PM
So let me get this straight. Instead of greedy politicians chasing all that money we'll substitute them with gready bankers? Good luck with that.
Satch13| 5.5.12 @ 8:42AM
Well said. The Mario generation will have to live and learn.
Occam's Tool| 4.30.12 @ 1:37PM
My state pension has a max limit of $100,000, roughly, for me---it will have had about half a million in contributions evenly divided between state and me by that time over 20 years. My plan is to work until I am 69, at the least, and then work as much as I can at that point. I put away about $60-70 K a year, and have about $200 K saved at age 49. House will be paid off before age 60. Of that 60-70 K, half is pre-tax protected.
If social security exists when I retire in 20 years, that will be an extra $3000/month. I maxed out my contributions years ago. We will see.
But I like my job and would love to work full time until my health and strength leave me.
The great Satan| 5.2.12 @ 1:55PM
My hat is off to you.
POST American| 5.2.12 @ 3:43AM
----SHUT OFF the Rockefeller engineered
'POP' 'CULL---chore' ---NOW!
--------Bring BACK immediately the culture
of wooing anc courtship --and MARRIAGE
----------------HUAC/ Nuremberg 2012---------------
SFC_Swede| 5.2.12 @ 1:22PM
As a Gen X'r born in 1967...I havent expected Social Security to be there for me for a very long time. I am not "higher educated" in the traditional sense, but even a grunt like me saw the hand writing on the wall. Social Security is a Ponzi scheme in every sense of the word. It worked when there were large numbers of workers paying and few beneficiaries, and the average life span was in the late 60's. But due to our advances...the system is no longer viable. Many Gen X'ers like me also took big hits on our IRA's and 401K's with the internet bubble, housing bubble, and recession/depression. I dont claim to have the answers, but agree that the baby boomers have continuously voted themselves more and more benefits, while at the same time another large portion of the population have voted themselves ever increasing government dependency. In a few words....we are screwed.
The great Satan| 5.2.12 @ 1:52PM
Stop trying to destroy America by stealing the SS trust fund and giving it to greedy wall street speculators to blow. We know it is the only thing left that wall street hasn't already stolen so keep your hands off.
Steve Smith| 5.3.12 @ 8:21PM
Yes David Bass is greedy little thug, who wants to rob money from those who can't defend themselves. But we also have to be real. The SS trust fund is a joke. The fund is government debt. Before you get mad, you need to realize that economically there is no place big enough to sock away the kind of money we are talking about here.
There is no trust fund, there never was. What we had was an extra tax, but they also cut taxes. It only mattered if you were rich or poor. The reality is that the current workers will fund the beneficiaries as usual...only our taxes will be a little higher and the benefits will be a little lower.
Rhoetus| 8.12.12 @ 10:57PM
There are no "funds" and there is no "trust" - I pity the fool who thinks there is a trust fund attached to "Social [sic] Security".
David Thomas | 5.2.12 @ 5:30PM
Saturday, August 1, 2009
An addendum to a birth certificate?
You are hereby informed that someone has used your imputed financial value to borrow money for their own use. It has been spent and is not recoverable. This may have been immoral, but was nevertheless quite legal because those that borrowed the money said so (made the laws). Payment on this debt will require your lifetime of labor. There is no way that you can escape this servitude. You have been, thusly, taxed without representation since you failed to vote before you were born or achieved legal age with wisdom. Try to bear your lot with its ever-present pain with the knowledge that the "Greatest Generation" that left you with this dire financial legacy did do some admirable things. Those may have been necessary for their own survival and welfare but do redound to your benefit. Keep in mind that they had a really good time with your money.
Slacker| 5.3.12 @ 12:56PM
I commend the boomers who acknowledge we have a colossal problem. Most boomers revert to talking total nonsense when it comes to social security.
Steve Smith| 5.3.12 @ 8:13PM
David, you are either an idiot or propagandist. First of all, social security isn't some big bank account. The current workers pay in, while exiting retirees benefit. So, you Gen Yers, will have your benefits paid by Gen Z and Gen A. You will also command bigger salaries than now as you assume the ranks of exiting boomers.
If you want to accomplish some good, why don't you take on the problem of the increasing costs of college and health care. You Gen Y'ers are starting in more debt, so of course you can't save until you pay off the interest that's compounding in the wrong direction. Then there's the high cost of healthcare which is resulting that empties your accounts in your later years.
One day, you'll have lived through a few recessions and watched helplessly as your hard earned savings evaporate, watch as your home value plummets, and your savings accounts fail to keep up with inflation. Then you'll thank God that your greed didn't spread to the rest of your generation and you will have something to fall back on when you can no longer work.
Satch13| 5.5.12 @ 8:47AM
Very well said Steveo. I fear that it is not something that can spread but something inborn in generation Mario.
wowzers| 5.4.12 @ 9:19AM
my mouth dropped open at the abortion line in the article. what an outrageous statement to make.
Realist| 5.6.12 @ 10:47AM
That's right. Less than 50 million babies aborted over the last 40 years and most of those would probably have been takers not makers.
CJK| 5.4.12 @ 11:22AM
It's because most of today's youth is starting to understand that the money system is false. They are waking up to the fact that there are better ways to save for retirement, and supporting this ponzi-scheme the government calls the "economy" isn't one of them.
Toby uk| 5.5.12 @ 4:08AM
So then the question is if the dissolutioned millenials are not saving what happens next? The boomers and gen y have seen their savings smashed in the crash and benefits eroded so the message is don't save. Perfect storm yes. The haves will pay for the have nots so now spend it while you can - or save and pay for everyone else later? Easy choice today but ripe for conflict later!
John | 5.5.12 @ 8:22AM
65 and still working. Of course it has always been a political program like anything run by the Gov. I paid the maximum all my life and if I live to the average age will only receive less than half my investment but I paid for many who contributed little. Same with medicare, paid all my life but the big O wants to now redistribute to people who never paid. As long as we accept Government robbery it will always be the same.
Satch13| 5.5.12 @ 8:25AM
So what do you suggest? I've paid in to the system for 34 years. Should I say "please SS, take half what I have paid for the poor entitled video game generation little pr_cks"? Sorry Davey, as an employer and manager I have found your generaation to be lazy, self-entitled, disrespectful and devoid of common sense.
christiangustafson | 5.5.12 @ 9:38AM
Yes, SS, the unpayable national debt, and other entitlements are serious problems.
Collapse is the answer. Embrace it in all its aspects.
cdt| 5.6.12 @ 8:04AM
1)FDR did not declare benefits at 65 as a way to get older people out of the workforce. Few people back then lived much past that age. People over 65 could rarely work in the type of jobs there were then - no work and you starved- the nation no longer wanted to accept old people starving in the streets.
2) You state that 60 percent of young people cash in the 401K with penalties when they move jobs yet say they would be better off keeping what they pay into SS - based on what they do with their 401K this might not be true.
3) You correctly point out that today's retirees have a 3 legged stool - SS, pensions and savings. That's sensible and you should model your plans the same way. As you move into positions of power reinstate reasonable pensions - Lobby today to Fix SS --65 is way to early to collect benefits at today's average lifespan.
What you have described here is a hopeless we have nothing attitude. You can shape your destiny. Just don't fall for this crap being fed by Wall Street that privatizing is better. They love the idea that the law will force you to take 12.5 percent of your income and funnel it into their mutual funds.
BSF| 5.6.12 @ 10:12AM
Most articles on SS skip over the biggest issue I have with the program as a GenY-type. This one did to. The SS Trust Fund lists it's massive holdings of US Treasury bills as an asset. The 2037 figure is, as I understand it, largely based on when those reserves are tapped.
The problem is that from a Baby Boomer perspective, those T-Bills are an interest earning asset, but for a GenYer they are a pure liability! When SS goes to the Treasury and asks for cold, hard cash, where does the Treaury get it? It has three choices: 1) Borrow it (again) and let Gen Y pay the interest indefinitely. 2) Collect it as tax revenue from Gen Y. 3) Print it and erode the purchasing power of GenY.
In other words, when you split the assets and liabilities of SS across generational lines, SS is already broke from the GenY perspective. Yes, it's a transfer payment system so we were always going to have to make payments to the Boomers, but now we have to do it twice. Once through our actual SS payroll taxes, but again through our income taxes so the Treasurycan make good on its obligations to SS.
The Boomers never really paid into SS. In a big way, they paid in and then loaned the money back to themselves as government debt for the rest of us to pay back.
Blue| 5.9.12 @ 9:51AM
A succinct way of putting it. I like it.
Only thing I would add is that it wasn't the Boomers whop cut the deal in the early 1980s...that was mainly the GI "Greatest" Generation voting themselves a massive increase in retirement income that they never paid for with Silent Generation acquiescence. The Boomers are at fault mainly for not addressing the issue in the 1990s when we had a budget surplus.
Realist| 5.6.12 @ 10:54AM
In the end the politicians will take the easy way out. Keep paying SS, inflate the currency to monetize the debt (the biggest holders are the Fed and the Chinese, neither of which vote), and repeat.
Robert Pope| 5.7.12 @ 2:17AM
Mr. Bass: Social Security is, indeed, an "entitlement" in the classic definition of the word. I am 66, applied for my Social Security card when I was 9 years old, and have contributed to SS every year since then. I am, indeed, "entitled" to my SS benefits. SS is not "broken".; our sorry, self-aggrandizing legislators need to stop "borrowing" from it by shifting numbers around on the governmental balance sheet in order to finance their "pork barrel" projects. There is a way to fix this: it's called the ballot. You younger generations are spoiled rotten; put your confounded iPhone down and deal with reality. I make no apologies for having worked hard, saved, and thought about my future.
RickShelton| 5.7.12 @ 9:56AM
Folks, there is no trust fund! There is no vault of money that will be depleted in 2037. This is a Ponzi scheme perpetuated by our federal government. Money coming in is paid out to current beneficiaries. Until recently there was money left over but now they are borrowing money to cover the shortfall. If you want a meaningful amount of money available for your retirement you'd better start saving it yourself.
Blakeva| 5.8.12 @ 2:01AM
Rick- Do some research. SS is not a PONZI scheme. It is a tax transfer scheme. There is no implied investment in social security. There is a certain tax that funds retirees at this time. Future tax will fund future retirees. (What is so hard to understand about that????) Obviously there is an expectation that future generations will take care of the seniors at that time but that is hardly a Ponzi scheme. Is being in the military a ponzi scheme? Folks are in the military with the understanding that in the future OTHER people will be in the military to defend the county. In your logic when the current military personnel retire, the military will cease to exist and the country will be gone.
Blue| 5.9.12 @ 9:52AM
The problem, as well stated above, is that payroll taxes paid by Gen X and Millenials were NOT transfered. Rather, they were used to support other government expenditures.
Stan Redmond| 5.13.12 @ 4:29AM
SS "funds" were also raided by Clinton to show a mythical surplus.
R Preece| 5.7.12 @ 3:05PM
Lower birthrate "Fueled by abortion on demand?" How about "Fueled by freely available contraceptions." Or perhaps "Fueled by the availability of something to do in the evenings when the sun sets other than go to bed and make babies." Or perhaps "Partially mitigated by a surge of migration, with undocumented workers contributing to support both today's and tomorrow's retirees without hope of benefiting themselves." Throwing in completely extraneous and irrelevant political commentary defuses what could be a worthwhile discussion. Conflagating the trust fund with social security also makes your argument a political flack rather than a rational discussion. Too bad.
Blakeva| 5.8.12 @ 1:56AM
Stop saying that social security won't be there in the future. That is so stupid. What does that even mean? So in 50 years when those workers are paying their SS tax where will the money go? Into a landfill???? Nooooooo. It will go to pay the retirees at that time. Now you can argue that the amount of the social security payments will be different - most estimates put it at 75% of the current rates....but that is far from NO Social Security.
Bobby Dias | 5.8.12 @ 5:32AM
Why should they save anything, if they are anything but black- Barack Obama actively promotes killing all people except black. No incentive to save.
Mick Lee| 5.8.12 @ 8:39AM
What’s all this resentment against Boomers? I am sixty and all I have ever heard since I was in third grade was how bankrupt S.S. was going to be by the time I reached retirement…and “tough cookies” because our parents and grandparents were not about to forgo the benefits they voted for themselves—they weren’t about to listen to us. So work and “contribute” we did.
We did so as our elders moved to Florida and Arizona, took trips to Europe, cruised up and down the left and right coasts, and scooted around these United States in gas-hogging RV.s (All because they “earned it” you understand.) Change? Our elders formed a huge voting block which few in Washington wanted to confront. And why would they? As far as most of our elders were concerned, if S.S. went bankrupt, if the last full S.S. check ever issued was the one they got just before they died, what did they care? “Hey, Bozo’s, we earned it!”
Still, we were willing to do something all along the way. Even though our elders claimed several times to have “fixed” S.S., few of us believed it. Sacrifices may eventually have to be made; but it sure wasn’t going to be made by them.
So what about now? Few of us expect S.S. to be half as good to us as it has been for our parents and grandparents. S.S. will either be reduced or run out by the time we get there. Whatever, few of us can actually afford retiring at 65 and maybe even 70. Even assuming the rosiest optimistic forecast, any S.S. checks at any realistically possible amounts will not be enough—not nearly enough-- to retire on. Only the densest among Boomers believe our children and grandchildren will put up with more and more of their incomes being taken to supply us with our monthly ration of dog food and the occasional McDonalds Happy Meal.
Oh! And forget the dot.com crash. Forget the subprime crash. For most of us, our retirement nest eggs began to nosedive during the Clinton “Golden Age”. For more times than we care to remember, we would have been better off if we had kept our money under a mattress than in our investments for retirement.
We boomers have been vilified by our elders. Trashed by our own children. Studied and dissected by “experts” and academics. Sold a bill of goods every which way. Used as the largest guinea pig population for long term medical studies in history (the “pill” anyone?). We’ve had it up to here with armchair bitchin’ from those older than we are and those younger. You can take your attitude and keep it. Bite me.
Blue| 5.9.12 @ 9:54AM
Um, your SS benefits are not going to be cut. You're going to get the same deal your parents did. You failed to roll back their profligate spending; that's why Gen X and the Millenials are so screwed.
Joshua| 5.8.12 @ 9:39AM
What gets mentioned too little is that the stock market is a ponzi scheme in its own right, as the returns we have come to expect from it are dependent as much on inflows of new money as they are on actual economic growth. Further, the stock market is full of traps for ordinary "dumb money" investors (i.e., us), resulting in a situation where 401K plans have actually been shown to have significantly poorer results for would-be retirees than defined benefit plans.
david hilton| 5.9.12 @ 10:01AM
Your point about the significantly poorer results obtained by 401k plans is valid. And that is without even adding in the additional demerit that all capital gains made by your 401k investments will be taxed at full tax rates, and not at the capital gain rate. Talk about a Ponzi scheme, and one that is regularly sold without full disclosure of this point being made!
aa915| 5.8.12 @ 10:02AM
"Upper echelons of society"? Are you joking? Apparently an essential element of the millennial's sense of entitlement is promoting the myth that everyone over 45 is making a six-figure income, hoarding vast wealth that should rightfully have gone to their precious selves. All part of a vast, generation-wide conspiracy (because it's *always* a conspiracy, isn't it?) to deprive you once again what's rightfully yours. And what' s rightfully yours is--well, basically everything, right?
I almost wish it *were* as simple as convincing boomers they should die in the saddle at age 80 just so there's more left for you, but Social Security doesn't even work that way. Never has, never will, and was never intended to. It's not a personal savings account.
Cliff Hanger| 5.8.12 @ 10:35AM
This article leaves out important information. Boomers have paid into a system all their lives and Congress robbed it to buy votes from the 40% who contribute nothing. It is a ponzi scheme. Congress was too greedy to keep a good thing going for future generations. It's too bad that the blame is being placed on "nose to the grind wheel workers" who unwillingly financed SS and not on the Politicians who do not work for the people who elected them. The young blame the wrong age group. The plain truth is that our Govt. is corrupt and getting worse. The US has become GOVT INCORPORATED pure and simple. It's too bad govt. has turned the young against the old. Game over, bad givt. wins again.
The Expat Guidebook | 5.8.12 @ 11:03AM
This is the primary reason that more and more of the 25-30 demographic are starting to make their way out of the U.S. to places where they don't need to rely on social security and pension from a failing government. The power of the Internet = you can be location independent and work anywhere in the world without needing to put your trust and reliance in a system that has failed.
Myself in particular, I was debt-free at the age of 29 and completely retired by the age of 31. When most people ask me about it they think that I somehow magically made a million dollars...and when I tell them that I did it on a median wage salary of around 40k a year, they just boggle. It's all related to the cost of living. A perfect example is New York City versus Mexico City...the two cities have exactly the same demographics related to crime, murder, global banking, universities, population, creature comforts, modern amenities and beyond...yet while it costs 30k a year to live like a pauper or 50k a year to hold a middle-class existence in NYC, you can live in Mexico City for 12-15k a year as an upper middle-class citizen with everything you had back in the states.
When you can take your median-salary of 30k a year post-tax and apply that towards a place where your cost of living is 12k-15k a year...well....it's pretty easy to start putting away 15-20k a year into your savings. You make more money, you get more to put away. And considering the average 3-bedroom home in a modern place like Mexico City or Santiago or Buenos Aires only costs 35-50k versus the 225k an average home costs in the United States...you can have your house paid for in just a few short years and be completely retired and enjoying life LONG before you hit 65-70 years of age.
Don't put your trust in 401ks and pensions and social security...the only real way to ensure your own retirement is to take charge of your life and stop trusting in banks and governments that are continually failing and are only out to make a buck for themselves. Control your income, control your destiny, and realize that the ENTIRE PLANET is your home and you can go where the benefits are the best for you.
David| 5.9.12 @ 1:39PM
But you can never run away from paying US Federal income tax on the money you make anywhere in the world.
David| 5.9.12 @ 1:39PM
But you can never run away from paying US Federal income tax on the money you make anywhere in the world.
Rhoetus| 8.12.12 @ 11:01PM
Tax slaves unite! You have nothing to loose but your chains.
John Luma| 5.9.12 @ 2:18AM
Great analysis. As the Mils-Ys-Xs age they will gain the political clout to legislate changes that offer choice retirement savings and investment plans. "Consent of the governed" applies to all.
Lisa| 5.9.12 @ 8:21AM
My dear, this could have been an article written in 1984, when I first entered the workforce. My generation had the same concerns, and the same fatalism that we'd pay for old people and never see a dime ourselves because the system would be bankrupt when it was our turn to retire. We wrote op-eds too about how the system needed reform, but the generation older than us wouldn't hear of it. They basically said, "We fought World War 2, so shut up."
Blue| 5.9.12 @ 9:55AM
Yep, that's pretty much what happened. The GIs--who barely paid anything into the system--instituted COLAs and huge benefit increases.
cygnet| 5.9.12 @ 8:43AM
The future of Social Security will be determined by future generations and the idea that it will run out of funds by 2037 is advanced by those who want it to end. If any time in the coming few years actions are taken to strengthen Social Security, there is no reason it cannot serve all those now alive and future generations. A majority in all generations of Americans have found it difficult or impossible to prepare for retirement on their own. In the future, some will succeed. Many will not. Social Security was meant as a safety net and if the latest generations get behind it and support it as such, it WILL be there for them. However, if they weaken it by opting out or reducing their support for it, it will not be there for them. No one can know what their personal future will bring, but with a healthy Social Security kept in place, most can count on a modicum of dignity in their old age. An increase or removal of the caps on income taxed for this highly successful very important program will preserve it for many generations to come.
david hilton| 5.9.12 @ 9:57AM
I do not understand why you think it remarkable that young people would pass on putting money into savings plans that pay less than 1% (when the high likelihood is that at later points in their lives the interest rates will be much higher); nor why they would find a 401(k) plan very attractive, particularly when, as now, capital gains are taxed at rates so much lower than regular income is. (Yet capital gains earned by a 401k are taxed at full rates which can often wipe out the gain entirely).
Yes, it is widely recognized that Social Security has elements of the Ponzi scheme about it. But it is far less widely acknowledged, except by those who have recently had to cash out, that the 401(k) is equally a sucker's deal. A young person today is almost certainly better off to take the money that they would have diverted to such a plan and buy shares in Apple directly. Those shares will appreciate enormously (and pay dividends) over the next 40 years, and the capital gains tax will be low. Any shares, however, that do well when invested in your 401(k) will be subject to full taxation and will struggle to return a comparable profit, even with the additional employer money you would have to invest over such a period.
Seems to me that younger persons may be more intelligent than you, and many others, give them credit for.
David| 5.9.12 @ 1:35PM
Nothing I have found pays a better return than SS.
I paid in 2250 dollars to get my 40 quarters and now get a check every month for 870 dollars.
That's what I call a great return.
David| 5.9.12 @ 1:28PM
Retirement age for collecting social security benefits should be raised to 75.
We are living longer, many 100 year olds ar around, and by doing so this would allow the SS fund to be more stable.
By working to age 75, we would plan and save more for our retirement and give our kids more.
Hobert L Davis| 5.10.12 @ 10:17AM
I am now 77, when I was in my twenties I was not saving money either as it took everything me and my wife made to just get by. The future does look bleak for both old and young.Jesus is our only hope.
Ray Ray| 5.10.12 @ 11:19AM
What a bunch of doodoo. We should have had Gore's lock box! It's too bad that the money was borrowed from this useful program and now nobody wants to pay it back. Every year, I have to pay more into this program as the caps increase and I'm happy to do it. But I expect my share. To call recipients moochers is a shame and an insult to people who paid into this program. I'm sick of these pay more, get less plans. Here's an idea, let's raise the minimum wage to $15. Young people will have lots more money to put into the SS program and maybe they can afford to save something beyond that!
Jeff| 5.10.12 @ 1:03PM
I wonder where we would be if there wasn't between $60B and $200B of Medicare/Medicaid in fraud each year?
I wonder where we would be if we didn't have people dressing up as their dead grandmother to collect benefits?
I wonder where we would be if we drastically reduced giving handouts?
I wonder where we would be if CEO's weren't bringing in enormous sums in salary and benefits each year and instead shared those profits with all employees since it's the company as a whole that is responsible for bringing in the revenue?
I wonder where we would be if we took seriously fraud, identity theft, and related crimes?
The list could go on for pages but when it comes down to it, I think we (as a whole) are our own worst enemy. Too many people profit inappropriately for these things and these problems will continue to further collapse our entire economy.
Here's an idea for a start. We have huge numbers of unemployed and underemployed people, right? Let's put a bunch of them to work in overhauling our archaic system to prevent these types of enormous waste.
john dubose| 5.12.12 @ 1:01PM
Although there are lots of ways to invest whatever money one has, they are all either dangerous or pay NEGATIVE real returns. This is all due to past and present policies of the Federal Government. Most people young or old have negative actual incentives to invest. We must change our national mindset to fix this.
beyondculturewars| 5.13.12 @ 11:37AM
I am in the bust of the baby boom, or the forefront of Gen Y, and I've been advocating for SS entitlement reform since the 1980 Reagan campaign. During the Gingrich Congress, don't forget it was the AARP group that was essential in defeating SS reform at that time and part of the silent and WWII generation that helped to kick the can down the road.
When Paul Ryan presented his Road Map for America, I was very please and willing to accept the changes -- for myself and my generation-- that would reform and maintain our safety net.
All generations in America will need to sacrifice in order to turn the debt ship around before it founders. It's time for all of us to stop thinking in terms of how much we 'put' in and how much we can 'take' out.
Frank Katz| 5.13.12 @ 3:21PM
Your arguments are all reasonable, but you provide no solution. You don't even provide information on the size of the problem. If we assume a 5% yield, it would take almost $16,000 per year over 40 years to save $2,000,000. And, the $2 million is a guess as no one can know what sort of inflation we will be subject to. It should also be noted that if someone were to manage to save precisely $2 million, and have an investment year similar to 2008 during a year or two prior to retirement, that person would be in big trouble. And that is precisely why a 401(k) will NEVER replace a defined benefit pension plan as a vehicle for saving for retirement. If you Gen Yers are smart, you will start working for a universal defined benefit plan, with a real fund (not governmental IOUs) which will provide a reasonable level of guaranteed benefits at retirement - which, by the time you get there, will be closer to 75 than to 65. Good luck, you'll need it.