How Social Security Works

Social Security Crisis?

Workers per beneficiary
Workers per beneficiary

Current fears about a Social Security crisis are based on two reports, one by the Social Security Trustees and another, more optimistic report by the Congressional Budget Office. The overall issues can be expressed in terms of "workers per beneficiary" -- if there are far more workers putting money into the system than beneficiaries drawing money out, the system is in good shape. As that ratio changes, the system gets into trouble. In 1960, 5.1 people were paying into the system for every one person drawing benefits; in 2005, there are 3.3 people paying into the system for every one person drawing benefits.

According to the Trustees' report, the amount of money in the Social Security fund will continue growing until 2018, at which point the amount being paid out for benefits will begin to exceed the amount being paid in by younger workers. There is enough money in the account to keep paying full benefits until 2042, at which point the account will start to run dry unless benefits are cut. The Congressional Budget Office report essentially says the same thing except that everything will take about 10 more years to fall apart.

While there may not be an immediate crisis, there is certainly a problem. As both President George W. Bush and former President Bill Clinton have said, it will be a lot easier to fix the problem now than it will be in 30 years, when the system is in imminent danger. The remaining question is, what can be done to fix the problem?