Social Security Myth # 2184 -- There Won't Be Anything For Me

By Dean Baker

February 20, 2001

Public opinion polls consistently show that a large share of the working age population does not believe that Social Security will be able to pay them benefits when they retire, or at least that future benefits will be small compared to what current beneficiaries receive. This is especially true among younger workers who often believe that the baby boom generation will leave the Social Security coffers empty.

While the Social Security trust fund is currently building up a large surplus, which will be depleted by the retirement of the baby boom generation, most of the funding for benefits will always come from current taxes. Even after the trust fund is depleted, there will still be a very large flow of tax revenue each year. Given current projections -- which assume that the economy's growth slows to half its rate of the last seventy years -- this revenue will be insufficient to pay full scheduled benefits in years after 2037.

However, the scheduled benefit for new retirees rises in step with average wage growth, which is projected to be 1.0 percent annually. This means that even if the program could not afford to pay the full scheduled benefit in years after 2037, it could still pay retirees a benefit that is substantially larger than what current retirees receive.

The table below shows the benefit that the Social Security system could afford to pay to an average wage earner retiring at the normal retirement age (which reaches age 67 in 2027). The benefits are adjusted for inflation and expressed in year 2000 dollars.

Assumes Retirement at Normal Retirement Age.

Source: Social Security Trustees Report 2000, p185 and author's calculations.

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, DC.