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The Daily Tar Heel

Column: The expiration date on social security

Photo Courtesy of Dreamstime/TNS.

What does social security mean to you? 

To me, it’s a term I associate with wrinkles and dentures. It’s something that doesn’t concern me until my hips chronically hurt, and I move to Florida to play bingo with my few surviving friends. It’s a mundane historical term I’ve convinced myself won’t be pertinent for me because of how much money I’ll make as a writer because this line of work is known for its sparkly tax bracket. How I wish I could remain that blasé. 

In 1935, the year when social security was signed into law, the average life span in America was about 61. The Act created a social insurance program designed to pay retired workers age 65 or older a continuing income after retirement. Therefore, the average worker was dead before he or she was able to receive benefits. That’s the government, always looking out for you. 

Today, the average life span in the U.S. is 79, meaning social security is a much more relevant and necessary institution than it was in the '30s. The benefits are primarily funded through a payroll tax paid by the current working class that supports those who are retired, disabled or have suffered the death of a spouse or parent. In the past, those taxes have generally been able to cover all the expenses of the program. Notice how I said generally. 

Hug your relatives and pray they leave an inheritance because we’re not getting jack from the government. Essentially, a recession sucks for a lot of reasons, but here’s one more to worry about.

Increasing life spans and dismal economic outlooks have experts shrugging at younger generations while saying “good luck with that.” In a couple of decades, we’ll have a lot more to worry about than the exorbitant price of eggs. 

Because grandma and grandpa are living longer, more funds are being taken out than are going in. In fact, in 2021, Social Security started dipping into reserve funds that it’s accumulated over the years to help cover benefit payments. The Congressional Budget Office projects the reserves will be depleted by 2033, a swift 10 years from now. Then the program will only be permitted to pay 75 to 80 percent of benefits under the law, resulting in a wide-spanning cut for all beneficiaries. 

Social security will play a limited role in future retirement incomes unless the government decides to compensate for the diminishing reserves with higher taxes. That’s where you and I come in. 

Current recessionary conditions have done little to alleviate this stressor, as people are saving less and less. In a recent survey, Suze Orman, a personal finance expert, found that two in three Americans couldn’t cover a $400 emergency expense without tapping into credit cards or taking out a loan. A year before, 68 percent of respondents to a similar Federal Reserve survey said they could finance a $400 emergency with cash rather than borrowing. 

At that time, however, many households relied on COVID-19 stimulus checks and benefited from decreased spending due to quarantine. According to a recent LendingClub report, as of December, 64 percent of Americans were living paycheck to paycheck, up from 61 percent a year earlier. It seems fewer and fewer people can afford even the time to think about saving for retirement. 

Still feeling at least a little hopeful? Allow me to fix that. 

Generation Z and most Millennials couldn’t spot a recession if it stole their latte. We know the textbook definition, sure, and its effects on our dad’s hairline, but many of us probably couldn’t predict how it would affect us. We’re familiar with the meltdown of the late 2000s and the pandemic crash, but this could be our first “ordinary" recession, where we actually have to worry about making ends meet and navigating a struggling economy.

If you feel inclined to study up, Deutsche Bank economist Brett Ryan suggests looking for clues in the early 1990s recession. Similar to now, the late '90s saw consumer spending pull back in certain areas, but not overall. Economic growth slowed as the Fed implemented multiple interest rate hikes to soothe rising inflation. Outlooks were bleak. 

Fortunately for us, however, our labor market is strong as ever and Fed chairman Jerome Powell has faith in our resilience. And, honestly, I don’t think our generation has the capability of taking anything seriously enough to be stressed about it. I mean that as a compliment.

But back to the future. 

Job loss, reduced earnings and higher prices in recent years have wrought havoc on Social Security reserves. Many believe lawmakers will implement a plan to solve the Social Security shortfall before the agency is forced to cut back benefits. However, polls of younger generations reveal less than optimistic sentiment about how much of their retirement savings Social Security will account for. At least we’re not delusional.

So, not only do we face a possible tax increase as we learn to navigate the 9-to-5 life, but we also may not reap any rewards from the very program we’re funding. Moral of the story? Take your parent’s advice and start saving. You’re on your own now, kid.


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