Generation X has been told since we started working that Social Security would go broke before we would ever receive any benefits. A new study by Harvard and Dartmouth researchers puts the date at which the Social Security trust funds will be tapped out at 2033. And the demographics at that point only bring in taxes that can pay 75% of benefits due.
For Generation X, that means that those of us turning 50 this year will see an insolvent program when we hit 68. Or one year after the current age to receive full benefits. I just received my statement from the Social Security Administration last week, and it lays out the difference in monthly payments for electing to take Social Security early, at 62, or waiting until you are 67. And the difference is fairly substantial. The question is, should the spectre of insolvency in the system make one consider taking the early retirement in order to insure that you get something back?
I don’t think we will actually get to that point of course. Even with bad demographics due to lower than expected birthrates, there are many ways to fix Social Security. Raising the age at which benefits can be claimed seems to make sense, given increased lifespans. And the rate of taxation could be raised, though I would hate to see that. Likewise one could remove the ceiling on OASDI taxation. Although I don’t see that the last option raises that much money — the tail of the income distribution.
I fully expect that Generation X will see an increase in the age at which we can draw Social Security. Time to start re-planning that retirement!