I was in my early 20s when I realized Social Security would not be there for me, so I would have to save for my own retirement.
In the early 1980s, I worked for a company that provided training to members of Congress & their senior staff on what was then these "new-fangled personal computers." It was enlightening to the members of Congress & select staff. It was also enlightening to me.
Part of the training program involved a custom software program we put together that worked like this. It modeled Social Security inflows & outflows. It put together pretty graphs & pie charts. It relied on actuarially sound data & forecasts. It showed the impending tidal wave of "Baby Boom" retirees... by sheer numbers. It showed the number of people who will be working to support those retirees, both on the then-actual number of human beings already born (and forecast for their earnings & SS contributions) and the number of human beings not-yet born but expected to be born, etc.
As you might imagine, the graphs showed a surplus of inflows over outflows, and then a deficit of inflows relative to outflow... and that deficit grew & grew & swamped the Federal Government.
Shock! Horror! Disbelief!
Part of the training allowed the members of Congress & their senior staff to alter the normal parameters you might imagine: retirement age, FICA % paid, FICA $ cap, means-test the benefits... even immigration rates.
As you might imagine, the graphs changed... yet they ultimately still show a deficit of inflows relative to outflows that swamp the Federal Government ...
More Shock! More Horror! More Disbelief!
Of course, the thing that couldn't change was the number of people in each age cohort: they've already been born.
The end result, as you might imagine, was nothing. Members of Congress & staff learned a bit about computers, but rarely has Congress actually, you now, done something about the impending SS problem.
Everyone who is currently drawing SS, and everyone who is eligible to draw SS over the course of the next 67 years, has already been born. We can count them. We could write their names (SS numbers) on a figurative/virtual piece of paper.
Everyone who currently contributes into the SS system to pay for the above retirees for the next many years has already been born & we can write their names down, too.
Everyone who will begin to contribute into the SS system over the next 18 years has also already been born.
It doesn't take a rocket scientist to see the system is broken: it takes an actuary. Actuarial Science is actually pretty good at forecasting the future. "An actuary is like a CPA but with less personality," the old joke goes.
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For all elected representatives, it is ever so much easier to kick the can down the road and not deal with the problem. Vocal advocates for retirees such as AARP mobilize when there is a whiff of a threat to their constituency, and elected representatives, eager to please such an active donor constituency & lobby & voting bloc, does its best imitation of an ostrich.
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The same problem exists with public employee union pensions (& medical plans) and many large private employee union pensions (& medical as well).
By "problem" I mean kicking the day of reckoning down the road to the next term or the next set of boards of directors.
For example, during its final 5 years prior to going bankrupt, guess who was the largest supplier to General Motors? Steel companies? Nope. Auto Parts suppliers? Nope. GM's largest supplier was Blue Cross. When a major manufacturer's largest supplier is a medical provider (especially for its retirees), you know you have a problem.
The problem is worse for public employee pensions than private employee pensions because the accounting rules are different. After several private pensions went bankrupt in the 1960s and early 1970s, Congress passed ERISA (1974), which, as amended, brings more sound accounting to private pensions but it does not apply to public pensions. It does not apply to Social Security either. It doesn't apply to public sector pensions because public sector unions lobbied to
prevent actuary-calculated sound accounting. Why? it would reduce the pot of $$ available for current compensation & benefits. Far better to just kick the can down the road.
I suggest picking up a copy of "
While America Aged: How Pension Debts Ruined General Motors, Stopped the NYC Subways, Bankrupted San Diego, and Loom as the Next Financial Crisis" By Roger Lowenstein. If you prefer, the book is available as an audio book you can download from your local public library & play on your iPod.
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