As Baby Boomers Retire So Will The Social Security Surplus

For years lawmakers have been living on a “fat” budget made by the Social Security Surplus of the Baby Boomers. Treasury Secretary Henry Paulson included estimates on the surplus in a report released September 23, 2007. This report emphasizes the report of the Social Security Trustees earlier this year. As the first baby boomers begin to retire in 2008, that surplus will dwindle. By 2017 it is estimated that surplus will be gone and then the federal government will have to find new funding for Social Security as more baby boomers retire and enter the program.

According to Henry Paulson’s report, the annual Social Security cash surpluses of 2009 should peak around $99 billion. About 10 years after that Social Security could have a deficit swinging close to $99 billion!

Since 2001 some lawmakers, researchers and administration officials have proposed more than two dozen reform plans. Paulson states he is trying to find some common ground between all the proposed competing plans.1

Why was a surplus generated? Since the mid 1980’s baby boomers have actually been paying more taxes than was needed to finance the retirement benefits for people older than them. According to the Treasury report, between the end of 1983 and the end of 2006, the inflation-adjusted trust fund balance rose from $50 billion to $2 trillion.

The oldest of the baby boomers, born in 1946, will be turning 62 next year (2008). Many will apply for early retirement benefits through Social Security. According to the U. S. Census Bureau, about 77 million people of the 302 million in the U.S. people are baby boomers, or about a quarter of the current population.2 As more and more of the baby boomers retire there will be less workers paying into Social Security. Last year, there were about 3.3 workers for every person getting Social Security, including the disabled and retirees, according to the 2007 Social Security Trustees Report. "The baby-boom generation will have largely retired by 2030, and the projected ratio of workers to beneficiaries will be only 2.2 at that time," the report said.3

GAO Chief ,(Government Accountability Office - an investigative arm of Congress that audits and evaluates the performance of the federal Government), David Walker , who took charge of the GAO on November 9, 1998, states that Social Security has three options for its future financing. He states U.S. government will have to raise taxes, cut spending or borrow more from the public.

According to the White House web site on Social Security, “The President has assured Americans that he will not change the Social Security system in any way for those born before 1950.” 4

“The government has made promises it cannot afford to pay for with the current pay-as-you-go system. In 1950, there were 16 workers to support every one beneficiary of Social Security. Today, there are only 3.3 workers supporting every Social Security beneficiary.

In 2008 – just three short years from now – baby boomers will begin to retire. And over the next few decades, people will be living longer and benefits are scheduled to increase dramatically. By the time today’s youngest workers turn 65, there will only be 2 workers supporting each beneficiary.

Under the current system, today’s 30-year-old worker will face a 27% benefit cut when he or she reaches normal retirement age.” 4

If reforms are not made it will be our children and grandchildren who will be paying the price.