While it is common knowledge that Social Security is in trouble, not everyone knows why.
Social Security has many sides that include the good and the bad. On the good side is the fact that Social Security will not run out of reserves until 2034 and on the bad side it will run out unless something is done. And the last bit of bad news is the political leaders of the U.S. are not close to agreement on fixing the problem.
The cause of the problem is covered by Fox Business in "This Scary Social Security Trend Can't Be Ignored Any Longer."
There are three reasons why the trust fund is running out of reserves:
- The first cause of the problem is that the baby boomer generation is retiring at a faster rate than younger generations are going into the workforce. That means payroll taxes will not be enough to cover current benefits.
- Another problem is that Americans are living longer generally. Thus, the lifetime benefit amount the average person receives is greater. In most contexts people living longer is good, but in the context where that means they receive more money from Social Security it is bad for the health of the trust fund.
- Finally, a lack of education about how Social Security works could also be hurting the system. If people retire as soon as they are eligible, they might receive lesser benefits, but they also are not paying into the system anymore. That can cause some serious problems.
Reference: Fox Business (May 1, 2016) "This Scary Social Security Trend Can't Be Ignored Any Longer."