When Kathleen Casey-Kirsching gets her first Social Security check in January, official Washington should take notice – and start getting our nation’s finances in order.
Casey-Kirsching is officially the first baby boomer, having been born one second after midnight on Jan. 1, 1946. She has said she will opt for early benefits at age 62, accepting a 24 percent cut in the payments she would receive if she had waited until her full retirement age of 66.
That makes Casey-Kirsching the first snowflake of a demographic blizzard that will batter Social Security as the boomer generation reaches retirement age. There are about 50 million Americans currently receiving Social Security, about one for every three active workers paying into the system. When all 80 million Americans born between 1946 and 1964 are drawing benefits, there will be about one retiree for each two active workers.
That demographic shift is worrisome because Social Security doesn’t invest all your taxes and your employer’s matching contribution to cover your ultimate benefits. Instead, it relies mostly on taxes on current workers to pay current benefits.
That doesn’t mean Social Security faces imminent bankruptcy. A 1983 reform commission led by Alan Greenspan proposed a series of reforms, including higher taxes, to create a trust fund to cover the coming demographic bulge. Unfortunately, Congress stopped short of adopting all the recommended reforms. As as a result, a Congressional Budget Office study predicts the trust fund will be exhausted in 2052. After that point, taxes coming in will be enough to pay just 78 percent of projected benefits.
The Social Security Trustees have a more pessimistic study of their own that puts the day of reckoning at 2041.
Should we really worry about a system that seems solid for at least 34 years? Emphatically, yes. Relatively modest reforms now can not only ensure America keeps its promises to our senior citizens, they can safeguard the solvency of our nation itself. The Post has long advocated two basic reforms that, if adopted now, would probably ensure the solvency of the system until at least 2080.
The age for full benefits, now 67 for Americans born in 1966 or later, should be raised to 68 for those born after 1972, as originally recommended by the Greenspan Commission. Early retirement at reduced benefits would still be available at 62.
The earnings limit for Social Security taxes, now $97,500, should be raised by $2,000 a year for each of the next five years, in addition to the regular adjustments that reflect inflation.
These modest steps would meet the concerns raised by the General Accounting Office. But no one can predict future life expectancies with certainty.
That’s why Congress should revisit Social Security every few years and make further adjustments to the retirement age and future benefit structure if future conditions warrant it. When it comes to America’s financial future, ignorance is definitely not bliss.
