If no changes are made to the Social Security system, it will be $11.9 trillion short of being able to pay retirees their benefits over the next 75 years.
This is because Social Security depends on the contributions of current workers to fund current retirees’ benefits. Sixteen workers supported each retiree in 1950, but only three do today. By 2030, there will be only two. This demographic trend guarantees that if we do not reform Social Security, either massive benefit cuts or huge tax increases will soon be necessary.
Younger workers must be allowed, as the president proposes, to save a portion of their payroll taxes in private accounts. Every dollar a worker saves toward retirement is a dollar that future taxpayers will not have to pay.
The cost of maintaining current retiree benefits while directing money away from the current system and into private accounts is estimated to be one or two trillion dollars. But transitioning now will save taxpayers six trillion dollars over the long term.
Social Security must change. Instead of waiting until we have no choice but between benefit cuts and tax increases, we should move now toward private accounts. Every day we wait raises the costs for us all.
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