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You have probably already heard that baby boomers are to blame for the financial problems of social security.
Yet a new study from Boston Center's Center for Retirement Research suggests the opposite.
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Boomers born between 1944 and 1964 are generally thought to have put undue pressure on the system because of the size of their generation.
About 10,000 people reach the age of 65 every day. A lot of these people are claiming Social Security retirement benefits, which has created the impression that they are draining the system.
However, the Center for Retirement Research found that the generation of baby boomers born between 1946 and 1964 would actually have paid more into the system than benefits would receive.
There is, however, a group of retirees who received more money than they gave: people who lived through the Great Depression of the 1930s. That's because they generally worked less years before receiving benefits.
And the research revealed that the political decisions taken during the first years of the program, namely the introduction of a pay-as-you-go (PAYG) system, helped to solve the financing problems we face today. hui.
"Whenever you have a PAYG system, it will cost more than a fully funded system," said Geoff Sanzenbacher, assistant director of research at the Center for Retirement Research.
"Missing funds"
Social security has made headlines for the funding gap it could face if nothing was done to change the system.
According to the latest report of the Social Security Administration Board, the system's trust funds will be exhausted in 2035. At this stage, only 80% of the expected benefits will be payable.
When it started in 1935, Social Security was like a private insurance plan, in which the funds received closely matched the contributions and benefits of different age cohorts.
But this has been changed with the changes made in 1939 that add benefits for spouses and minor children of retired workers, as well as survivor benefits for families in the event of the worker's death. At that time, the benefits were related to average earnings.
These changes meant that some retirees received more benefits than they had paid into the system. Salary tax receipts were used to make these payments.
However, this prevented the system from expanding the trust fund. Without those By increasing the reserves, the system also misses the interest that the money could bring back.
The "Missing Fund", as it is named in the research, makes the program more expensive for current participants, as they must contribute financially both for their benefits and to make up for the missing funds.
In the current state of things, the current benefits are about the costs and therefore not too generous, said Sanzenbacher. "But we have to deal with this inherited debt," he said.
Possible solutions
According to the research, several approaches could be used to fill the gap.
One way would be to raise taxes. Any increase should be permanent, according to research.
Another possible solution would be to temporarily raise taxes until a sufficient special trust fund is created. Once this money is there, the system could return to the current level of payroll taxes. The current social security tax rate is 12.4%, which corresponds to an equal distribution between employers and employees.
Tax increases could take several forms: increasing the percentage of payroll and maintaining the current social security ceiling of $ 132,900; increase social charges and eliminate the social security ceiling; or switch from a payroll tax to an income tax.
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Small tax increases could be used to top up the interest that the trust fund did not pay because it was exhausting, while larger increases could help replace the trust fund itself.
"There are different ways to deal with this problem," said Sanzenbacher.
This will require thinking about whether to burden the current, future or intermediate generations, he said.
"We will have to do something," Sanzenbacher said. "We do not try to propose what we do.
"We're just trying to make it clear that you can make different choices."
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