For those set to retire in the very near future and who have been paying into Social Security for the longest period of time are the first generation of workers who will have paid more than they will receive at retirement.
This reality is a scary proposition for future retirees who will likely continue to receive less and less in benefits. Generations of previous retirees have been afforded a much better deal because in the 1930s when Social Security was started, payroll taxes were very low and continued to be low for several decades to follow.
Former deputy Social Security commissioner, Andrew Biggs relates that Social Security benefits for previous generations was a great deal. “The government gave you free money and getting free money is popular.’
For those who retired in 1960, there was an expectation of receiving seven times more in benefits that was actually paid into Social Security. For the low income workers, there was even more benefits available provided men worked until the age of 78 and women worked until the age of 81. By 1985, workers could still expect more benefits but not as much as their predecessors.
Now, retirees who are higher wage earners will not receive as much as they paid in taxes with low income workers still getting slightly more. The trustees watching over Social Security funds say now that the funding will ‘run dry in 2033’ if Congress does not do something.
The progressive shift among middle income earners is leaving fewer workers to pay into the Social Security system. To recover the funds, future retirees will likely be required to pay higher taxes during their working years while still receiving less benefits at the age of retirement.