The Baby Boomer generation will begin taking early retirement in 2008. In 2011 they will approach the traditional retirement age of 65. As more and more Baby Boomers retire they will put a tremendous strain on the Social Security system. So far, no significant changes have been implemented to lessen the impact Baby Boomers will have on the Social Security system. The longer any action is delayed the more drastic the changes will be. Will these changes affect you? If you were born between 1946 and 1964, then you are officially a Baby Boomer and will probably be impacted by the Social Security funding problem.
The current and projected future financial status of the Governments’ trust funds is presented in the “The 2007 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds (OASDI).” The good news is that the Social Security Administration (SSA) states that there are no plans to reduce benefits for current retirees. In fact, benefits for current retirees are scheduled to continue growing with inflation. However, the 2007 OASDI Trustees Report also states, “Social Security’s combined trust funds are projected to allow full payment of scheduled benefits until they become exhausted in 2041. This means that unless changes are made soon, benefits for all retirees could be cut by 26 percent in 2040 and continue to be reduced every year thereafter. If you are “younger” senior citizen or a want to-be senior citizen, this is not good news
The Trustees of Social Security, the Comptroller General of the United States and the Chairman of the Federal Reserve Board have said, the sooner we address the problem, the smaller and less abrupt the changes will be. The independent, bipartisan Social Security Advisory Board has also said: “As time goes by, the size of the Social Security problem grows, and the choices available to fix it become more limited.” Addressing the problem now will allow today’s younger workers planning for their retirement to have a better assurance of the future of Social Security. The problem has not been addressed as of 2007.
If Social Security is not changed we have a limited number of options in the future. The options are to increase payroll taxes, reduce the benefits of today’s younger workers or borrow from the general fund. Social Security’s Trustees state, “If no action were taken until the combined trust funds become exhausted in 2040, much larger changes would be required. For example, payroll taxes could be raised to finance scheduled benefits fully in every year starting in 2040. In this case, the payroll tax would be increased to 16.65 percent at the point of trust fund exhaustion in 2040 and continue rising to 17.78 percent in 2080. Similarly, benefits could be reduced to the level that is payable with scheduled tax rates in every year beginning in 2040. Under this scenario, benefits would be reduced 26 percent at the point of trust fund exhaustion in 2040, with reductions reaching 30 percent in 2080.”
Social Security was never meant to be the sole source of income in retirement and that especially applies to the Baby Boomer generation. It is often said that a comfortable retirement is based on a “three-legged stool” of Social Security, pensions and savings. American workers should be saving for their retirement on a personal basis and through employer-sponsored or other retirement plans. If a Baby Boomer is not preparing for retirement with a pension and/or savings to supplement their Social Security benefits, they will have to delay retirement or continue working part-time.
Glen Jensen is a writer for [http://www.SeniorCitizenDirectory.com] which is a site that provides Senior Citizen Information.
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