Demo Dozen

SOCIAL SECURITY: What Does the Future Hold?

Headlines warn “The Social Security Fund Will Dry Up, If Changes Aren’t Made!” What is the basis for this dire prediction? At the simplest level, statisticians calculate solvency by balancing the money paid into the fund through employer and employee contributions, the fund reserves, and the monies paid out to retirees.  A large segment of America's population is now reaching retirement age while anticipating extended lifespans!  Hence, economists estimate a shortfall in future Social Security funds, as a smaller percentage of the population struggles to support the older generation in their "golden years"  (see line #1 in the graph below, indicating that insolvency will occur around the year 2040).

 

                              How Would You Balance the Fund in the Long Term?

 

In this simulation, you have an opportunity to utilize any of three policy options: (1) You may alter the tax rate; (2) Alter the benefits paid to retirees; or (3) Delay the retirement age to 70. Will any one or combination of these provide a reasonable long term “solution” to the problem?

 

An illustration of output from the simulation (below) of two possible policy options (lines #2 and #3; line #1 is the baseline prediction, if nothing changes) suggests certain options may be more successful than others. What those might be and whether or not they are “realistic” are challenges that await you in this simulation!