The Social Security forecast doesn’t add up
When I hear President George W. Bush expounding on the “critical” state of the Social Security system, it makes me think of Chicken Little proclaiming to one and all, “The sky is falling, the sky is falling!” Is Social Security really in as bad a shape as he portrays it to be, or are his statements scare tactics intended to shock us into buying into his private investment accounts scheme? These would be funded by diverting a portion of the Social Security payroll tax, only adding to the much-ballyhooed Social Security Trust Fund deficit.”Common knowledge” is telling us that starting in about 17 years, Social Security payments will exceed receipts, and that in another 20-25 years, the Social Security Trust Fund will be depleted. This is attributed to the baby-boomer generation, those born between 1945-65, who will be retiring between 2010 and 2030.The total number of births during the 20 years following World War II was approximately 77 million. However, the “normal” birth rate during those 20 years would have been about 3 million per year, or 60 million during the two baby-boom decades. That means that the above-normal number of births during the baby-boom years was about 17 million. Of that number, approximately 14 million are expected to live to the retirement age of 65.Statistics show that the number of people 65 years or older increased from 25 million in 1980 to 35 million in 2000, a rate of increase of five million per decade. At this rate, the 65 and over population is projected to be 40 million in 2010, when the baby-boom effect kicks in.The current projection of the 65 and older population for 2030, which will include all of the baby boomers, is 71 million. Yet if you add the 14 million baby boomers and two decades of the historical growth of 5 million per decade to the 65-and-over estimate for 2010, you come up with 40 + 14 + 2 x 5 = 64 million in 2030, which is a significant 10 percent below the 71 million forecast.A putative increase in life expectancy may have been used in predicting the 71 million for 2030, but is that realistic? Life expectancy for the average baby boomer born in 1955 was 69 years, but those who have now reached the age of 50 are expected to live another 30 years, to age 80. But instead of having another year or two added to their lives because of increasingly better health care, there is growing evidence that obesity and the related health problems of diabetes, high blood pressure, and heart disease may actually reduce the life expectancy of many baby boomers by two to five years.All in all, it looks like the predicted 71 million eligible for Social Security by 2030 may be overstated, and that the solvency of the trust fund may well be less threatened than is presently claimed.The solution, if one is really needed, may be as simple as means-testing, but not as proposed by the president, who would put the burden of reduced benefits on the middle class. Reduced payments should apply only to those who do not need full Social Security benefits, for example decreasing from full benefit to zero over an annual income range of $100,000 to $200,000.And what about personal retirement accounts? Why do we need them when we already have IRA and 401(k) plans? What good would they do for someone earning $20,000 a year? He might have $400 a year to invest, which at an annual growth of 5 percent would amount to $48,320 in 40 years. But a 212 percent annual inflation rate would reduce the purchasing power of this sum to $25,360, which could be less than the amount by which his Social Security benefits would be reduced because of his personal investment account.Glenwood Springs resident Hal Sundin’s column runs every other Thursday in the Post Independent.
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