When I was a young boy I heard about "the Baby Boom." After World War II, in the late 1940's and early 1950's, many Americans had children. This was a period of time before birth control was widely used but after the war years. Many young families decided to have children at the same time. Wikipedia defines this time as 1946 to 1964.
My parents did their part! Seven of my nine brothers and sisters were born during this time period.
"We will have to build more schools," the newscasters said at that time. "So many children are being born; we do not have space for them all. Children born at that time are called "baby boomers." I've never liked the name. But I didn't create the English language. At least the people who created English had the forethought to name the science of philosophy after me.
Now, Americans are concerned because the baby boomers are retiring. What effect will that have on society? The government has promised all Americans that we can have retirement income from a program called Social Security. When Social Security was created in 1935, all workers had to help pay for Social Security, but none of them had retired! The government accepted Social Security taxes, but had no one who was retired to pay benefits too. The government spent that money. They do claim to have "saved" the money for when the baby boomers retired, but they didn't really save it. Instead, the government accepted my Social Security tax money and then loaned that money to the government to pay other government bills! So, while they claim Social Security money was "saved," it was really spent!
Now, all of us who are in the Baby Boom generation are retiring. We want the government to start paying us Social Security benefits, in the form money sent to us each month after we retire. In the 1950's the average American lived to be about 68 years old. Now, that has increased to about 78 years old. The full retirement age was 62, but has increased to 65 for older people, 66 for most baby boomers, and 67 for the post-baby boom generations.
For me, I can retire as early as 62 on Social Security, but I will be penalized if I do so. For each year I retire early, my monthly benefit check will be reduced by 8% for the rest of my life! BUT if I work longer, I can get an 8% bonus for each year I work beyond age 66. It is a gamble. You never know exactly when you are going to die at the time you retire.
How will this impact the US government? In the past, the government receives more money from workers than it paid to retirees. But that has changed. As of 2011, the government is paying more to retirees than it receives from workers. As we say in English, the "cash cow" has "dried up." A "cash cow" is an easy source of money, but when that source is gone, the cow's milk "dried up." Today, the US government has to use tax money to pay some Social Security benefits.
Some people claim, "Oh, that's not a problem. The government has saved that money in the form of government bonds. Well, yes, that did occur. But where does the government get money to "buy" the bonds from previous worker's taxes they paid the government? The government "pays back" the loan it made to itself! That is, general taxes have to be paid by workers to repay the "loan" to the Social Security program. Thirty years ago, when we had many workers, the "extra" Social Security tax paid in was "loaned" to the government by the government. It was like "free money" to pay for government expenses. Now, those "loans" are being paid back to workers in the form of retirement benefits. The only way the government can repay those loans is to use other tax income.
Confused? I hope so. It is a very confusing program. Social Security retirement money really helps many people. But the system is very complex. Feel free to ask questions! I'm a little over age 59. I'll be retiring soon enough! In fact, I am both retired and working full time!
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