The Reality of Social Security: If Reform Doesn’t Happen, What Must Each of Us Do?

• In Event: Session B: Public Interest

Abstract

This paper adopts the premise that Social Security reform is beyond the reach of Washington and by 2033, at the latest, benefits will have to be cut. The Social Security Trustees project that, over a 75-year timeframe, payroll taxes collected can support a benefit level that is about 73 to 75 percent of current benefits. To be conservative, a 30-percent benefit cut is assumed. This paper endeavors to determine how much additional savings would be required for a wage–earner to replace this benefit reduction. Twenty-seven different retirement planning scenarios are examined, including three wage levels, three saving yields, and three wage-earner ages (i.e., time until retirement). Workers with the shortest time until retirement have the most difficult task. But, even with 35 years until retirement, low-wage-earners will find it difficult to save enough. These results provide insight into the viability of proposals to at least partially privatize Social Security.

Authors

• Michael J R Hoffman, Nova Southeastern University

• Karen McKenzie, Nova Southeastern University