Agreed. The “crime” here is that the boomers keep voting in Govts that will not change the status quo (that materially favours them) in order to make the necessary adjustments.
I happen to agree with an earlier comment you made.
Society will not “change” until it is staring into the financial abyss.
Until then, sheer political inertia will keep the proverbial ball rolling.
Yes, I am criticizing the PAYGo component.
Without checking I think that’s closer to the peak year for birth rate. Might be wrong. Also my own parents were born in 1947 which is closer to the beginning of the baby boom… I know 1947 wasn’t the peak, but the peak was early, IIRC.
This is factually and demonstrably wrong. When SS was instituted, it paid benefits to people right away, even those that never paid into the system. On a NPV basis, it’s started out with a huge negative value. Through the 60,s and 70’s , that deficit was reduced considerably. The Trust fund grew. The boomers paid that debt that their grandparents created. It’s not rocket surgery.
Oh hell, just looked it up. It was 1949.
Go ahead & pick 1949 if you want but it’s easier to calc ages in your head if you pick a year ending in 0. Whatever. Pick 1960 if you want. The slightly higher tax rates aren’t going to make all that much difference.
Pick 1975 if you want. Or 1990.
Because that was my birth year? 
Haha, that too!
This isn’t correct. The tax started in 1937 but the benefits didn’t start until 1940 and were only based on earnings from 1937 forward. No benefits were ever paid on earnings not taxed.
Still unsustainable but not quite as bad as you’re making it out to be.
The benefits were initially not supposed to start until 1942 but Congress moved it up.
On an npv basis it was negative. It’s really not complicated.
Sure… was and still is. But your statement that people who never paid in got benefits out is not correct.
That said, the benefit formula was a bit different then. They were not taking 3 years of income and dividing by 35*12 = 420 months and then using that “average” to calculate the benefit. The early recipients got quite a bit more than that and made out quite well as a result.
I agree. Francis Perkins held sway. The program was initially designed to build a fund first, and then pay. Within 2 years that was changed.
Not that anyone is going to actually spend the time, but I’ll link a 13 year old YouTube lecture from a Yale Exxon prof. It’s over an hour long. And all the reasons others have stated, including you, have elements of truth. The design was meant for a different economy, a different society, and an ever growing population. A lot has changed, and it is time to rethink the whole scheme.
For a big country like the US, paygo funding seems like the only option.
Canada, with a GDP that is 1/10th the size of the US and 2% of the world total can maybe invest in other countries. Even then, if the demographic future is declining populations in all “major” economies, profits might not be what you’re expecting.
For a closed economy, all old age support schemes are paygo in real terms. The goods and services that old people use are overwhelmingly produced after they quit working.
Democracy is not binary. On the Economist’s democracy index Mexico is characterized as a hybrid regime.
This is the US population pyramid for 1965. https://www.populationpyramid.net/united-states-of-america/1965/
I finally got enough time to do a calculation.
I found a source for median income by education level for full-time, year-round workers so I used it for incomes. I graded to reflect some experience increases in the first 10 years. It was only available with a gender split. I got these numbers (expressed in 2016 dollars):
Males: taxes, $377,000 ; benefits, $374,000 ; IRR, 0.0%
Females: taxes, $261,000 ; benefits, $339,000 ; IRR, 0.9%
The women do better because they have lower incomes so more income is in the 90% and 32% bands, and they live 2 more years, and they have a steeper wage history and benefit a little more from the best-35 rule.
I also tried an “all full-time, year-round” workers wage history with blended mortality. That generated 0.7% IRR.
As you mentioned, I should adjust for DI. I backed out the taxes that explicitly go to the DI fund. My male IRR went up to 0.4% and the female to 1.3%.
(note that these IRRs are in excess of inflation)
There were comments that the boomers made out because they had so much income during lower tax years. Simply charging them 12.4% in every year reduced the IRRs to -0.2% and 0.7%. Not a dramatic difference to me.
(If I look at the OAS taxes only, the impact is even smaller. It turns out that the DI deduction grew in the later years when the total didn’t.)
All these numbers ignore the value of survivor and spousal benefits. And, I assume we’d get higher IRRs for workers who didn’t work full-time year-round for 44 years.
This is pretty much what I’d expect. We’ve had a growing labor force and that has kept IRRs about zero. The positive is less than critics would assume they could have earned if they had invested wisely themselves.
(earnings source is table P-24 here: Historical Income Tables: People )
What are you using for a mortality assumption?
You’re giving someone median wages their entire career? That’s not particularly realistic.
Asked an AI bot the question and got an answer from this source:
I used the Social Security cohort tables for birth year 1950. I just went with expectation of life at age 66 because I figured that was good enough given the very low IRRs I was generating.
As I mentioned, I graded the income for the first 10 years. I started at 74% of the median and went up in equal steps to 104% of the median. That gave me an average percent of 100%. The 74% comes from your assumption. You said start at the overall median in the first year, the 74% produced that.
I think we can conclude that Social Security provides low returns to two income households with relatively high levels of income and provides good returns for those with lower career earnings either due to low pay or sporadic attachment to the labor force. I think that’s the way the system is supposed to work.
It was intended to keep the retired worker out of poverty.
What many forget is that it is pretty rare to have US parents live off their children in retirement.