I need a grandkid.
I want grandkids. I’m in my 50s now, and I’ve paid for my kids and put two through college (the youngest is still there, and should graduate on time).
Now is the time when I should be showering grandkids with lavish gifts, allowing them to do anything they want, and then handing them back to their parents when they’re tired, full, and cranky. I can’t wait! But I have to wait. Because I’ve only got one married kid, and she’s not interested in children anytime soon.
This is a problem for me. But it’s also a problem for the nation as a whole.
While I like to think that my grandchildren will be so intelligent, good-looking, and talented as to command nationwide importance, it’s really about something much less complicated.
We need my grandchildren, and millions more like them, to grow up and pay taxes. Without them, many of our systems will break down. Social Security is a case in point, because it’s already bankrupt. It just hasn’t reached the end of the line yet.
In 2017, 42 million retired workers received $57 billion in Social Security benefits. Another $10.3 billion went to disabled workers, and almost $7 billion went to survivors (widows, widowers, and children).
Almost 90% of Americans over 65 receive Social Security Benefits, with roughly 23% of married couples and 43% of singles over 65 relying on those checks for 90% or more of their income.
The program is very important to our social fabric and is the main reason we beat poverty among the elderly.
And the program is broke.
Social Security, since 2010, has brought in less than it pays out. Only interest on its $2.8 trillion trust fund keeps the program from sliding backward. That won’t last long. In 2021, the trust fund will start to dwindle, and it will be tapped out by 2035. That might sound like along way off, but it will happen before a baby born today graduates from high school.
After that, we’ll only bring in enough to pay about 75% of the benefits we’ve promised. To pay 100%, we’d have to raise the payroll tax from 12.4% of payroll to 17%. We could also tax those who earn high incomes on all of their earnings, but then we’d have to pay them more in benefits as well.
But there is another path, which seems much more likely.
We’ll cut benefits.
I don’t expect Congress to chip away at the monthly check of 75-year-old single people who have no other income. Instead, our faithful congressmen will look around and determine that those with other assets and income, so-called fat cats, can afford to give up some of their benefits.
Never mind that they paid for those benefits over their working lives. The slashing of their Social Security checks will be for the greater good… whether they want to make the sacrifice or not.
Unfortunately, if you’re investing in the markets or saving for retirement you probably fit Congress’ definition of a fat cat, because 39% of workers report that they and/or their spouse have absolutely nothing saved for retirement. Zip.
These will be the people that get trotted out in front of congressional committees, lamenting how they will suffer if their benefits are slashed. Our hearts, and our cash, will go out to them. And we’ll get smaller checks.
Short of dramatically raising taxes, there’s no way to change the path.
We simply don’t have enough workers entering the economy to boost Social Security revenue over the next 15 to 20 years.
So do yourself a favor. With markets at record highs, look through what you own and ask yourself, “Will this provide me with a stream of income that will help with expenses in retirement?”
We all need to ask ourselves that question, because I’m certain Congress isn’t concerned about how I fund my golden years.
As for the 2040s and beyond, there is a way to start rebuilding the Social Security safety net. We could have more children today.
It’s hard to see how we could replace the 25% of lost Social Security tax revenue quickly, but any additional growth to the population would be welcomed by the nation.
I hope my kids are reading this. I could use a grandkid… or two.