Why the younger generation will bear the brunt of social security reform

Retirement


  • Exactly when to retire is usually a personal decision.
  • However, social security reform can affect people’s lives based on its timing.

Protesters take part in a May Day demonstration in Rennes, France, on May 1, 2023.

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Protests continue in France over the pension age being raised from 62 to 64.

The US may be poised to make a similar change in Social Security retirement ages.

This change is unlikely to elicit the same outcry that has been seen in France. But some experts say the younger generation should take to the streets, or at least play an active role in the debate about how to reform the program.

“No one is talking about change. [current] “Doing something that affects current retirees,” said Howard Gleckman, a senior research fellow at the Urban Brookings Center for Tax Policy, could affect nearly retirees over the age of 55.

“This will affect young people, people of working age,” he said.

Social security will face a significant inflection point in the next decade.

The program is structured so that workers’ contributions from payroll taxes cover the majority of current beneficiary benefit income. But with 10,000 baby boomers turning his 65 every day and by 2024 he is expected to be 12,000 per day, the program faces funding shortfalls.

The Social Security Council’s latest projections found that the program’s Consolidation Fund will be exhausted by 2034. This is him a year ahead of the 2022 forecast. At that point, only 80% of benefits are paid.

This country used to be here. In 1983, changes were enacted that extended the program’s solvency, including taxation of benefits, and gradually raised the retirement age from 65 to 67.

Today, that higher retirement age is still being phased in. People born after 1960 must wait until age 67 to receive their full “retirement age” benefits.

But we can hardly hold the younger generation accountable for future changes in the program, as lawmakers have vowed to abandon changes that would affect near-retirement and current retirees.

“All these things are coming back to haunt young people,” said Lawrence Kotlikoff, an economics professor and social security expert at Boston University.

This is generational expropriation.

Lawrence Kotlikoff

Professor of Economics, Boston University

Currently, Social Security applicants receive reduced retirement benefits if they start at age 62, or 100% of benefits earned if they claim at full retirement age moving to age 67. But if you wait until you’re 70, you’ll receive 8%. more each year.

For example, if you are eligible for a monthly benefit of $1,000 at full retirement age, you will receive only $700 a month if you start at age 62. Instead, if you wait until you’re 70, you’ll receive about $1,240 a month. Jason Fichtner, former Social Security Administration executive and chief economist at the Center for Bipartisan Policy, noted in a panel discussion.

Raising the retirement age further reduces benefits for the earliest claimants who may not be able to afford to wait until age 62.

Therefore, it will be necessary to consider how such changes will affect high-income and low-income claimants, Fichtner said.

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Other changes may be considered, including tax increases, benefit reductions, or a combination of both. This includes raising the payroll tax rate (currently 12.4% split evenly between workers and employers) and raising the top wage income subject to these taxes to $160,200 in 2023. may be included.

If neither benefit cuts nor tax increases are acceptable to politicians, they may resort to general revenue transfers, Fichtner said.

This represents $200 billion to $300 billion a year on top of the current $31.4 trillion national debt, he said.

“That means we’re piling up debt to the next generation,” says Fichtner.

“There is no free lunch here,” he said.

Other creative solutions could be implemented, he suggested, such as a carbon tax or a financial transaction tax on stock sales.

Social security may still exist for younger generations. However, younger cohorts could bear the financial burden, Haltzel said, depending on what changes are made.

“As we’ve seen in the past, politicians prefer to inflict pain on those coming down the pipeline, not those who are currently retiring, so you’re going to be standing firmly in the crosshairs. .Generation Z audience member.

“Get involved and stay involved,” she said.



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