Should Generation X Say Goodbye to Social Security?

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Social Security has faced financial threats for years, with the latest projections suggesting the demographic onslaught of baby boomers will completely deplete the Social Security trust fund by the mid-2030s. For Members of Gen Xers, who are currently in their mid-30s to early 50s, the prospect of a Social Security crisis looks like a case of very bad timing — and a potential recipe for retirement disaster. . Social Security won’t go away even if the trust fund is cash-strapped, but Gen Xers should nonetheless watch their backs to ensure that political movements do not take advantage of their small numbers to implement anti-benefit measures at the ‘to come up.

Generation X fears that social security will collapse when they need it. Image source: Getty Images.

Why Gen X is worried

The immediate problem facing Social Security is that demographic trends are leading to a shrinking workforce that supports a growing base of retired benefit recipients. Historically, there were between three and four workers for every Social Security retiree for most of the 1960s through the 2000s. Yet in 2010, that ratio fell below 3, and demographers now expect it to fall to 2.1 within a dozen years. 2029 will mark the end of the baby boomer generation reaching 65, and it will be when Gen Xers begin to reach that traditional mid-60s retirement age.

Fewer workers means less payroll tax revenue to fund benefits, which in turn will force Social Security to use accumulated assets in its trust fund to make up shortfalls. This is expected to happen in 2034, and when it does, Social Security benefits will be reduced between 20% and 25%.

How “Solutions” Could Hit Gen X Hardest

Politicians have been looking for solutions to the Social Security financial crisis for some time, but they have not found a consensus on how to solve the problem. Last year, many lawmakers believed that increasing Social Security benefits was the top priority, with the idea of ​​boosting tax revenue through higher base salary caps and other measures. Now, however, Republican victories in Washington are putting benefit-cutting measures back in the spotlight. These measures largely target Generation X and young Americans.

For example, the Bill on social security reform Rep. Sam Johnson (R-Tex.) would raise the maximum age for full Social Security retirement from 67 to 69. The 67-year-old provision hasn’t even fully come into effect yet, only those born in 1960 or later than the current full retirement age. According to the proposal, the full retirement age for people who have reached the age of 62 would increase by three months a year from 2023, and after the eight-year phase-in, it would be members of Generation X born in 1968 and later faced the immediate impact of rising retirement ages.

The impact of increasing age would be considerable. For those planning to file for Social Security at age 62 and have earned full retirement benefits of $1,500 per month, a full retirement age of 67 means you will receive early retirement benefits of $1,050. $ per month. The 30% reduction is the price you pay to claim five years earlier. Yet if the full retirement age increases to 69, the reduction increases to 40%, leaving the same person with only $900 in monthly benefits.

No surprise for Gen X

For what it’s worth, few Gen Xers are genuinely surprised by how the Social Security situation has changed. Even nearly 20 years ago, only two-fifths of Gen Xers believed that Social Security would be able to provide benefits when they retire. At the time, according to a poll by The Wall Street Journalmany thought taking advantage of the booming stock market was a better way to save for retirement, and a majority thought getting out of the Social Security system altogether was the best move.

Even growing up, Generation X remained more pessimistic about Social Security than other demographic groups. Even millennials have slightly more faith in Social Security’s survival than Gen Xers, according to the latest survey from the Transamerica Center for Retirement Studies, though more than 80% of both cohorts fear that Social Security isn’t really there for them when they are ready to retire.

Given the unstable political climate in Washington, it is extremely difficult to predict what changes might occur in Social Security by the time Generation X begins to retire in the late 2020s and early 2030s. It’s too early for Gen Xers to say goodbye to Social Security, but many in the generation seem resigned to what appears to be an impending rift at some point between now and retirement.

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