Tuesday, December 03, 2013
This image came from a larger graphic posted by Barry Ritholtz titled The Global Retirement Dilemma. I believe it has since ticked just under 3 since 2010 but regardless of whether that is the case or not the workers to beneficiary ratio will continue to shrink.
The US population has obviously been trending older and the baby boomers are on the front end of collectively starting to receive social security (and Medicare).
For a while now I have been saying that I expect something will give such that people will be means tested out of their entitlement. For anyone reacting to that by saying they earned their social security; yes that is irrefutable but doesn't improve the program's solvency.
According to various social security calculators my benefit will be about $3000/month if I can hold out until I turn 70. That obviously works out to $36,000 for maybe 30 years (both my parents are in their 80's and very healthy) plus some sort of COLA. That works out to $1,080,000 without the COLA.
If I pay in the maximum $15,000 (round number) for 50 years then I paid in $750,000 except I did not pay in the max for many years when I was younger. Taking out more than twice what you paid in would seem to be unsustainable on some level but of course this isn't really the right way to look at it.
When I turn 70 how many workers will it take to pay my $3000? How about you when you want/need to start taking your entitlement? Oh, almost forgot, my wife will be entitled to half of my entitlement--how many people will it take to pay her?
There are a lot more moving parts to this but I suspect the outcome will still be means testing or some other form of exclusion.
Posted by Roger Nusbaum at 3:26 PM