Millennials Not Expecting Social Security Benefits
June 9, 2014
Only eight percent of millennials expect to receive full Social Security benefits, and more than half (51 percent) believe that they will see zero Social Security money by the time they reach retirement, the Daily Caller reports.
A recent Pew poll highlighted millennials' lack of faith in the government retirement program. Such skepticism is entirely warranted, as the Social Security program needs a massive structural overhaul if officials expect the program to continue providing retirement benefits.
The largest federal program in operation, Social Security represents a staggering 23 percent of the federal budget. In 1940, just 55 percent of workers were covered by the program. Today, that number is 95 percent.
Why the spike? Improved life expectancy and medical improvements are a major factor. While life expectancy after the age of 65 was just 12 years in 1940, it is 19 years today. Yet despite that seven year increase, the eligibility age has changed by only two years.
As baby boomers transition into retirement, the system will see serious strains. Within 15 years, the number of Americans reaching retirement age will increase by a staggering 70 percent, while the number of Americans of working age will increase by just 6 percent.
- In 1935, when the program started, 17 workers paid for the benefits of one retiree. By 2035, estimates indicate that just two workers will be paying for the benefits of a single retiree.
- The program is expected to run out of funds by 2038.
How to reform the program? Raise taxes, cut benefits or create private investment accounts. According to economists, the U.S. would have to raise payroll taxes by 30 percent to cover the shortfalls. Instead, the U.S. should introduce private accounts:
- Private accounts would bring a higher rate of return. While medium-income workers born in the 1960s can expect a 1.9 percent to 2.7 percent rate of return on their social security dollars, average returns on the S&P were 6 percent to 9 percent from 1926 to 2002.
- Without changing worker benefits, the Cato Institute has designed a plan that would give workers under 50 the option to use a private, personal account instead of the current system. The accounts would use diversified, balanced portfolios.
Today's graduates are already struggling in a weak economy, and they cannot expect to see any retirement savings unless the Social Security program is reformed.
Source: Matthew La Corte, "Sorry, College Grads, You'll Probably Never Get Your Social Security Money," Daily Caller, June 3, 2014.
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