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Baby Boomers Turn 62


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#1 Em

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Posted 08 January 2008 - 12:05 PM

The Boomers Hit 62

Thursday, Jan. 03, 2008 By JUSTIN FOX (TIME MAG.)
Yes, they'll drain Social Security by 2041. But the money problems will begin long before then.

They're turning 62 this month, the first of the baby boomers are. Adorable, aren't they, as they hum along to the Beach Boys on their iPods and dream of Davy Crockett coonskin caps? In February the 100,000 or so of these January 1946 babies who opted for early retirement will get their first Social Security checks (averaging between $900 and $1,000 a month), marking the beginning of a demographic wave that will boost the program's rolls from 50 million to 80 million over the next two decades. Not so adorable, eh?

You've heard about the pending retirement of the boomers before, of course. You've also heard that Social Security faces some big funding problems. The two have less to do with each other than you might think. Social Security's insolvency remains a hypothetical threat decades into the future. But because of the particular way its funding was rearranged by Congress in 1983, the rest of the Federal Government, as well as taxpayers, will begin feeling the cost of the boomers' retirement in just three or four years.

Let me explain. In 2041 the trust fund that pays Social Security benefits is projected to run out of money. After that, a yawning gap between benefits and income stretches as far as an actuary's eye can see. This long-term gap is what President George W. Bush was trying to address with his failed plans to partly privatize Social Security. It's been the focus of almost all recent debate about the program.

Most of the baby boomers, though, will be dead by 2041. I was born in 1964, considered the final year of the boom, and according to the Social Security Administration, I should expect to keel over by the end of 2042. So it's not we boomers but long-run trends in immigration, fertility and life expectancy that are projected to leave the program chronically short of funds after that.

The trends can only be guesstimated, and that inherent uncertainty is cited by blithe spirits as reason not to do anything about Social Security. Worrywarts, meanwhile, argue that the distance of the looming bankruptcy is all the more reason to make changes calmly now. Both arguments have merit, but it's the former that is almost certain to prevail. Previous Social Security fixes came only when the checks were about to bounce, and that dire moment is decades off.

Such a funding crisis was just months away in 1983 when a bipartisan gang led by Senators Bob Dole and Daniel Patrick Moynihan cracked heads and persuaded Congress to move up some already planned payroll-tax hikes and shove back the full retirement age to 67 for future generations. Since then, Social Security has run a surplus. From an actuarial standpoint, this mostly solved the problem of funding the boomers' retirement. It also meant that the boomers will, as a group, put more into Social Security than they get out. (That's true of all age cohorts born since 1937; it's the Social Security recipients born before then who have, as a group, made out like bandits.)

The catch is that the surplus was invested in U.S. government bonds, to be cashed in later to keep the by-then-elderly boomers afloat. These bonds are simply claims on future U.S. taxpayers, and they're coming due. The Social Security surplus peaked in 2000, at 0.91% of GDP. It has held steady for the past couple of years but is expected to start shrinking fast in 2011. By 2017, Social Security should begin to run a deficit, one that's projected to grow sharply through the mid-2030s.

The crisis projected for 2041 is that the bond stash will run out. The semicrisis set for 2011 is that Social Security will quickly go from the big boost to federal finances that it has been for the past 25 years to a big drag (a drag greatly exacerbated by the cost of paying for Medicare for the boomers, which is another story).

Something will have to give. Big changes in Social Security itself seem out of the question, so federal taxes other than payroll taxes will have to go up, government spending outside of Social Security will have to be cut, or budget deficits will grow. Or, most likely, a combination of all three. And it will begin to hit during the first term of whoever gets elected President in November. Not that you'll hear much talk about that on the campaign trail.





#2 Em

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Posted 08 January 2008 - 12:08 PM

By 2041, I will be arely 60 yrs. old. I will not be eligble for retirement SS until age 67. I should stop shopping and start saving. smile.gif

And I am not even metioning that I have a daughter whose college education, new car and dream wedding I will most likely be funding in next 15-20 yrs.

I should get back to work! ohmy.gif

#3 ExtraHye

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Posted 08 January 2008 - 12:14 PM

QUOTE (Em124 @ Jan 8 2008, 10:08 AM)
By 2041, I will be arely 60 yrs. old. I will not be eligble for retirement SS until age 67. I should stop shopping and start saving. smile.gif

And I am not even metioning that I have a daughter whose college education, new car and dream wedding I will most likely be funding in next 15-20 yrs.

I should get back to work! ohmy.gif

Yes get back to work young lady.... Wait I should do the same thing. tongue.gif

#4 AVO

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Posted 08 January 2008 - 01:27 PM

Hitlers revenge

#5 Ashot

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Posted 09 January 2008 - 03:51 AM

no wonder hospitals let so many elderly people die...




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