Friday, July 6, 2007

Baby Boomers Should Be Taxed Until They Cry . . .

I'm 27, when I retire I will need more than a million dollars in order to be able to assure that I have enough. The failure of Social Security and Medicare to provide for me is absurd given how much in taxes I will be paying for these programs.

The system returns vastly worse than the market: If I pay $2500 (and my employer pays $2500) towards Social Security, but I instead invested that money in the market at an 8% return every year for 40 years, I would have an inflation adjusted $383,030, or enough for $30,000 a year in payount (i.e. about twice what Social Security would pay in this situation). Even if Social Security didnt go bankrupt, it would still be vastly inefficient and under-rewarding.

The Baby Boomers Will Bankrupt the System-the flood of baby boomers retiring will mean a lot more in withdrawals and a lot less in contributions. Young people will be stuck with the bill: either by paying more in Social Security taxes or by receiving far less in benefits.

The Baby Boomers Allowed the System to be Bankrupted-it was Baby Boomers who allowed politicians to not fix the problems and to systematically raid Social Security to pay for tax cuts, military spending, social spending and other expenditures which amounted to screw-the-next generation for an immediate reward policies. Now, that the Baby Boomers have become vastly more wealthy than the younger generations, its time for them to pay for their own problems.

Two Possible Solutions

  1. Fix the Problem Now- Baby Boomers' Social Security benefits should be cut or the retirement age raised NOW. No more of this grandfathering into the previous generous benefits levels. Baby boomers should take an immediate and severe hit to their level of retirement payouts. They broke this, they shouldn't be footing younger generations with the bill.
  2. Let Future Generations Chose- I should be given the choice about whether to invest the combined $10,0000 that's paid by my employer and I to Social Security in a government-run system that can't even beat 8% returns, or in the market by myself. If that causes older generations to have a funding problem, they have only themselves to blame.

One thing is clear, the fair solution is to adopt a "you broke it, you should fix it" solution. Baby Boomers and those who enabled the politicians to allow the system to go bankrupt, should now shoulder the burden of ensuring that future generations aren't vastly screwed over.


Angie Hartford said...

Um...don't blame an entire demographic, ok? Or assume that we're all wealthy.

Social Security is a Ponzi scheme. The boomers didn't create it, nor did all of us approve of how it's been mismangaed. We all need to save as much as possible for retirement, and not count on Social Security for anything. Unfair? Of course. But I'd rather do anything I can instead of whining about the broken system.

And remember: if you don't vote, you can't gripe.

Alex said...

I do vote, so I guess that means I'm allowed to gripe.

It wasn't just Baby Boomers that broke it, there were other older generations involved as well. But Baby Boomers will disproportionately be burdening the system and causing it to become worthless as a retirement insurance vehicle for my generation.

Baby Boomers as a group also stand in a much better position financially than twenty somethings. Thus they bear more responsibility for the problem and are capable of shouldering more responsibility (financially) than my generation, which is wholly innocent in all of this, but, right now, stands to bear the most burden.