Page 14 - Book12E

6
ment, and the birth rate is lower than in the past. The result is that the worker-to-beneficiary ratio has fallen from 16.5-to-1 in 1950 to 3.3-to- 1 today. Within 40 years it will be 2-to-1. At this ratio there will not be enough workers to pay scheduled benefits at current tax rates.
Q: What will happen if Social Security is not changed?
A: If Social Security is not changed, then by about 2033 payroll taxes will have to be increased, the benefits of today’s younger workers will have to be cut, or some other source of revenue, like transfers from general revenues, will be required. Social Security’s Trustees state, “If no action were taken until the combined trust funds become exhausted in 2033, then the effects of changes would be more concentrated on fewer years. For example, payroll taxes could be raised to finance scheduled benefits fully in every year starting in 2033. In this case, the payroll tax would be increased to 15.94 percent at the point of trust fund exhaus- tion in 2033 and continue rising to 16.60 percent in 2082. Similarly, benefits could be reduced to the level that is payable with scheduled tax rates in every year beginning in 2033. Under this scenario, benefits would be reduced 25 percent at the point of trust fund exhaustion in 2033, with reductions reaching 27 percent in 2082.” (The 2012 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds, April 23 2012)
Q: How big is the future problem?
A: Social Security is not sustainable at currently scheduled levels over the long term with current tax rates without large infusions of addi- tional revenue. There will be a growing shortfall once the trust fund reserves are exhausted in 2033. Social Security’s Chief Actuary projects that in present-value dollars, the financial shortfall (or unfunded obli- gation) for the 75-year period is $20.5 trillion. This unfunded obliga- tion is equal to 3.9% of the taxable earnings or 1.3% of the nation’s gross domestic product (GDP) over the next 75 years.
New Views About Retirement