Social security is vital to the financial well-being of our nation’s retired workers as well as millions of disabled workers and survivors of deceased workers.
The Center on Budget and Policy Priorities released a report in April 2022 showing that approximately 22.5 million people lift themselves out of poverty each year. social Security payment. What’s more, the existence of Social Security causes the poverty rate for older Americans to sit at 9%, as opposed to the estimated 38% without the program.
Yet as surprising as the program, which has been in place for more than eight decades, Social Security full of issues,
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Social Security has some well-known, long-standing problems
The Social Security Board of Trustees’ latest annual report says the Old-Age and Survivors Insurance Trust, which provides monthly benefits to retired workers and survivors, is on pace to deplete its asset reserves — built up since then. Additional Revenue Establishment – By 2034. Although Social Security and OASI There is no risk of bankruptcy or bankruptcyFailing to correct this capital shortfall could cut retired employee and survivor benefits by an estimated 23% over 12 years.
Some of the drawbacks of Social Security are well known. For example, the ongoing retirement of baby boomers from the workforce is something lawmakers have known for decades that will adversely affect the program. As more boomers enter retirement, the worker-to-beneficiary ratio has fallen. In other words, there aren’t enough new workers to counter the retirement of boomers.
Another Social Security problem that has been well-documented is the inability of cost-of-living adjustments (COLAs) for senior citizens to contend with real inflation.
Ideally, Social Security’s inflationary tether, the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), should help stabilize the purchasing power of the Social Security dollar with rising prices of goods and services. However, Mary Johnson, a social security policy analyst at The Senior Citizens League, a nonpartisan senior advocacy group, notes that The purchasing power of Social Security benefits has fallen 40% since 2000,
As you’ll see from the CPI-W’s full name, it is designed to track the spending habits of urban and clerical workers, many of whom are of working age and do not receive monthly Social Security benefits. This is a problem, as most of the beneficiaries are senior citizens. As a result, Significant costs are weighted less for retirees In the COLA calculation, while less-critical expenses are given additional importance.
Nobody’s Talking About Two Big Social Security Problems
But these well-known loopholes represent only half of the story plaguing Social Security. There are two other big problems playing a key role in Social Security’s projected cash crunch by 2034 — and hardly anyone is talking about this issue.
1. Historically Low Birth Rate
flying under the radar is the first problem America’s steadily falling birth rate, According to the Centers for Disease Control and Prevention, the US fertility rate — that is, an estimate of the average number of children a woman will have in her lifetime — needs to be 2.1 to properly replace one generation. In 2020, the US fertility rate hit an all-time low of about 1.6 expected births per woman. The birth rate has been declining rapidly for more than a decade.
The reason for this decline is complex and the result of a long list of plausible factors. We are seeing couples who wait a long time to get married and have children. Unintended pregnancies have also declined, which may be a reflection of Americans’ easier access to contraceptives.
Even the US economy can be blamed for this. The Great Recession (2007–2009), the COVID-19 pandemic, and the current technological “recession” all weighed on consumers’ pocketbooks and made them think twice about the additional cost of having children.
Historically low birth rates would put even more pressure on Social Security’s already declining worker-to-beneficiary ratio. Social Security cash crunch if there aren’t enough future workers to counter retirees from the labor force Could be bigger than the board of trustees currently forecast,
2. A Big Decline in Legal Immigration
Another problem for Social Security that is not getting nearly enough attention is the more than two-decade drop in legal immigration to the United States.
Regardless of what you may have heard or read, Immigration is 100% positive for Social Security, Most legal immigrants who come to the US are young, which means they will spend decades in the labor force, generating payroll tax revenue that supports Social Security. In fact, the Social Security Board of Trustees is currently handling an average of 1,281,000 legal immigrants entering the US annually over the next 75 years.
Unfortunately, Legal Immigration to the US steadily declining since the 1990s, According to the data, approximately 8.86 million total legal immigrants entered the US in the five-year period ending in the first half of 1997, compared to only 4.77 million in the five-year period ending in the first half of 2017. entered the US. world Bank. One can only assume that the immigration picture has been even more challenging during the COVID-19 pandemic.
If legal immigration drop-offs and declining birth rates aren’t addressed relatively soon, Social Security could face a severe cash crunch.
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