Will It Be There When You Get There

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Will It Be There When You Get There?

• By Jodi Heuvers
• Mature Advisors
• February 2005

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The oldest baby boomers will turn 59 this year.
In just a few short years around 2008, the first
wave of these baby boomer will become eligible
for Social Security (S.S.) retirement benefits.
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A brief description on S.S. for the Baby Boomers

• First, its been announced that the full
  retirement age is going up. Retirement age has
  been 65 for the last six decades of the program
  but now the age at which a person can begin
  collecting full S.S. benefits is on its way up to
  67. This increase was part of the S.S.
  Amendments of 1983, not coming into action until
  now, in order to give people enough time to
  prepare.
• Second, boomers should know that although
  Congress changed S.S.s full retirement age, it
  did not change the early retirement age, which
  remains 62. While the age has not changed, the
  reduction in benefits for taking retirement at 62
  is gradually increasing from 2 to 30 over the
  next 20 years.
• Third, there are certain facts that female baby
  boomers need to be aware of. Boomer women are
  more likely to get higher benefits on their S.S.
  record than on a spouses record. Boomer women
  are also more likely than earlier generations to
  have been divorced. Those female baby boomers
  that are married are likely to outlive their
  husband as well. Every one of these situations
  can effect female baby boomers S.S. entitlement.

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Will There Be Enough?

• The concern is not only whether or not S.S. will
  be available but if there will be enough funds
  for every one when they become eligible.
• Solutions have been offered from all sides. The
  President has recommended things such as private
  accounts to balance out S.S.. The 35.6
  million-member AARP organization, previously an
  ally with President Bush, helped push through the
  controversial Medicare law that created
  prescription drug benefits. They have now broken
  decisively with him, declaring that they will
  oppose private accounts that would divert tax
  money from S.S.
• We are dead set against carving private accounts
  out of S.S. taxes, says William Novelli, head of
  the lobby for the Medicare law. We can fix S.S.
  without dismantling it, which is what private
  accounts carved out of S.S. would do.

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Strategies for Change

• AARP has developed some possible changes after
  surveying seniors over the past year, as reported
  in the Wall Street Journal. They are as follows
• Raise the cap on taxable wages to 140,000 from
  the present 90,000. The present payroll tax of
  12.4, split evenly between employees, is clearly
  regressive. AARP calculates that this would
  cover 43 of the projected shortfall over the
  next 75 years.
• Raise the retirement age for full benefits
  gradually to 70 by 2083, for an additional 38
  gap.
• Reduce starting benefits slightly to reflect
  longer life spans, for another 25.
• Increase payroll taxes by one-quarter percentage
  point each for employees and employees, for
  another 24.

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Could This Work?

• Those measure alone would keep the system
  solvent for more than 75 years.
• Still, other possibilities exist. These include
  changing the benefits calculation, modifying the
  cost-of-living formula, investing some S.S. funds
  in market index funds and putting new state and
  local government employees on S.S.
• A final tip for baby boomers think online.
  Most boomers are comfortable using computers to
  conduct business, so they can expect and
  appreciate online government services to as well.