Without the guaranteed monthly income Social Security supplies, poverty levels among seniors would spike from 8.8% to more than 40 percent, according to an analysis by the middle on Budget and Policy Priorities (CBPP).
A recently published report from the Social Security Board of Trustees suggests that in under two years’ time, the program we all know now could undergo major changes, all of which might appear to be bad news for future and current retirees. Should Congress fail to generate any changes to Social Security, up to a 23% across-the-board cut in benefits could be led seniors’ manner by 2034, per the accounts.
What exactly is wrong with Social Security? The following 10 stats help clarify why this 82-year-old program is currently broken.
1. The worker-to-beneficiary ratio can drop 21 percent by 2035
The worker-to-beneficiary ratio is set to collapse out of 2.8-to-1 in 2017 to 2.2-to-1 by 2035, according to data from the Social Security Administration (SSA) — that’s a 21% decline. This fall owes directly to the simple fact that over 10,000 baby boomers are retiring out of the workforce every day, and there are simply not enough new workers to take their own place. The current amount of employees simply will not be able to support the ballooning number of eligible retirees.
2. The average U.S. life expectancy has improved by 18 years because the program was created
Another issue is longevity. When Social Security was signed into law in 1935, it was made to provide a safety net for seniors that lived beyond the normal life expectancy (then about 61 years), generally devoting their income for a couple of years.
However, as medical knowledge, access to medical care, and pharmaceuticals have significantly improved, so has our own lifespan. Thus the average life expectancy in the U.S. has climbed to 78.8 years, while the typical 65-year-old now is predicted to live two more decades. Meanwhile, the age of Social Security eligibility has only gone up with a couple of years. That means the program is often paying retirement beneficiaries for years, instead of a few decades. Social Security simply wasn’t designed to support the typical senior for 20 decades or longer.
3. Life expectancies among the wealthiest 20% are 12.7 years higher than those in the lowest quintile
Income inequality has been a culprit, too. Between 1980 and 2010, the gap in life expectancy between the wealthiest 20 percent and also the poorest 20% of Americans has widened substantially, according to a recent working paper from the National Bureau of Economic Research. Back in 1980, the lowest quintile lived an average of 76.6 years, while the highest quintile dwelt 81.7 years — a gap of 5.1 years. By 2010, this gap had increased to 12.7 decades, with the richest residing an average of 88.8 decades and the poorest dwelling to age 76.1 on average.
Why the developing gap? It probably has to do with the wealthy getting easier access to medical care because the price isn’t an obstacle. Lower-income Americans may not be able to afford preventative care that could prolong their life. Thus, not only are the rich living much longer, but they are also drawing a bigger payment from Social Security for an extended period of time; after all, how big your monthly Social Security check is based primarily on your lifetime earnings.
4. 62% rely on Social Security for at least half of their income
Recently released information from the SSA shows that 62% of seniors getting benefits rely upon their monthly test for at least half of their earnings. A little over a third (34%) get at least 90 percent of the yearly income from Social Security.
The SSA indicates that Social Security income is only designed to replace 40% of beneficiaries’ functioning wages. Though Social Security will replace more of your pre-retirement income if your lifetime earnings are about the low end, leaning on Social Security for 90% or more of your earnings is unwise.