The Pending Social Security Crisis in America
Recently, there have been several news articles about the coming social security crisis. But is it really as bad as the media says? If so, what should the average citizen do now to prepare?
We have all the answers and more in this blog article, so keep reading.
What is the Social Security Crisis?
In the United States, there is a program called Social Security which all working Americans pay into. Then, when an American retires, this program pays them a small amount to live off of, ensuring that Americans don’t have to work during their old years.
The problem is, this program was invented in the 1940s, prior to the baby boom generation, and back when the average lifespan was about 72 years. This means that when Americans retired at 65, they had about 10 years of benefits, give or take, before their death.
Unfortunately, when this program was invented, it also didn’t take into account that thanks to the baby boom in the 1940s, and the declining birth rate, about 30% of Americans will be over the age of 65 in 2030. This means that one-third of the country won’t be working, relying on the rest to pay for their lifestyle.
The other issue is, the average lifespan is increasing, and medical bills are growing larger than ever before, and in basic terms, social security is about to go bankrupt. Larry Fink, the CEO of Blackrock, estimates this will happen in 2035.
Related: Can You Add Bitcoin to Your Retirement Account?
What Happens When Social Security Runs Out of Money?
If you are in your 50s or 60s and starting to panic at the idea of social security running out of money, there is no reason to panic. Despite the fearmongering of the news, know that social security will still run, and still pay out, it will just be doing so at a loss, increasing the national debt.
Of course, the increase of the national debt is bad, but printing money to fill the debt is even worse. As a result, many individuals in the financial industry have begun to theorize possible solutions to coming crisis.
Related: Investing in Esports: The Biggest Gaming Companies
How Can the Social Security Crisis Be Stopped
Now there are many solutions, or proposed solutions to the upcoming crisis. The reality is, however, that several of them will likely have to be implemented in order to do any good.
1. Raising the Retirement Age
Larry Fink has proposed that raising the retirement age, even a couple of years, could do wonders for the collapsing system. When social security was invented in the 40s, 65 was already quite late when you were expected to die at 75…maybe making it to 85 if you were lucky.
Therefore, even just raising the retirement age to 70 could be a good solution. Not only would it provide more money for the system, but it would slow the massive retirements currently about to happen across several industries. Unfortunately, some industries have their own firm retirement age (such as pilots who legally must retire at 65) but this would still help significantly.
While people are upset that their forefathers got to retire at 65, remember that these forefathers only had about 10 years left until death. Currently, when you retire at 65, you still have at least two decades of life. So, while 70 might seem cruel, it actually would be a good thing for society to work a little longer.
2. Imposing More Restrictions on Companies
Currently, the reason so many Americans rely on social security is because their company doesn’t offer a retirement plan. If you aren’t working for the government, as a teacher, or working a high-level white-collar job, it is extremely likely you have no plan for retirement beyond social security.
Larry Fink wants to change this as well. Forcing more companies to offer some sort of retirement benefits for their employees, even if they are small, will lower the pressure on social security. But of course, in America, corporate greed trumps all, and he has gotten a lot of flak from companies who don’t want to thin their massive margins.
3. Increased Financial Education
Besides companies straight up not offering retirement benefits or programs, most Americans truly don’t understand the concept of saving for retirement. There are Americans who don’t even know how to save money, at all.
Establishing some sort of program to enhance financial literacy, or teach Americans about saving money, perhaps at the high school level, while it won’t help everyone, could help some Americans to set themselves up for retirement, lessening the pressure on the social system.
4. Adding a Social 401k for Gig and Part Time Workers
The final reason that the pressure on the social security system in the US is so immense is because numerous Americans work part-time or gig jobs. While it can be easy to say that they “chose their profession,” it's important to note that many Americans are part-time because they are parents, full-time caretakers, or work in a state where full-time work isn’t available (Alaska).
If the government offered a 401k for these individuals (not mandatory, but available and transferrable if they one day return to full-time work), it could go a long way toward helping those who want to help themselves but can’t figure out how to do it in the current system.
Of course, if you are reading this as a gig or part-time worker, know that you can currently invest on your own. Many platforms like Vanguard, Charles Schwab, and Fidelity already offer private 401k options. The problem is that these funds aren't transferrable if you one day return to a full-time job, which is one of the reasons a little government oversight in this area could be helpful.
Overall, we hope this has helped you to understand the pending social security crisis a little better, and to know that you don’t have to panic. We obviously recommend taking steps to help yourself now, however, as there is a huge possibility that social security will no longer be a livable amount by the time it comes to you.
If you can, take the time to see a financial analyst and get yourself set up for retirement, no matter what your age or profession. Because if there is one thing the US Government has taught us, it’s that you can’t rely on them to do the right thing until it is too late.
Related: The Best Bitcoin ETFs to Invest in
This article was brought to you by the Cryptocurrency Investment on MintDice - win with the house today. Originally posted to MintDice.com.