A Generation’s Nightmare

President Obama’s controversial healthcare reform plan is currently undergoing difficult deliberations. The intense debate of the two opposing sides is keeping the government and people of the United States too busy to consider an issue becoming more difficult by the day: the United States’ Social Security system may run out of funds within a matter of years, which would cause the U.S. to fall deeper into the mire of deficit. There are professional analysts who say that the United States’ Social Security system often looks like a trap and those who will feel its impact are the post-war “baby boom” generation. Once the hope of America, they became the backbone of the nation and represented the embodiment of the American dream. Now they possibly face retiring without any pension support and the prospect of perishing in miserable circumstances of poverty.

The “Baby Boom” Becomes the “Retirement Boom”

Between 1946 and 1964, about 80 million people were born. It was those born in this era who brought the U.S. the social revolution of the 1960’s and ’70s, and who influenced every level of American society and who are called the “baby boom” generation. American researchers believe the “baby boom” generation brought about “America’s modern great social movements and developed Americans’ sense of values and freedoms. These movements include the environmental movement, the consumers’ movement, the women’s movement, the civil rights movement, the movement for pluralism, and the human rights movement, as well as the movement to open up the U.S. government.”

The AARP is the largest and most influential organization of elderly citizens in the U.S. It provides information and advocacy about middle-aged and elderly persons’ benefits and civil rights to the U.S. government, Congress, and the whole of society. Its latest report indicates that the U.S. faces a demographic disaster: by 2010, one-third of the population will be over 50 years old and one-fifth will be over 65 years old. Furthermore, due to inadequate preparation for retirement, 71 percent of American adults plan to continue working after retirement. The U.S. government must prepare to accept these new forms of retirement.

But, viewing the situation as it stands, from pensions to longer working years, the U.S. government has done nothing to respond to three million people retiring each year, and this number will keep increasing through the 20 years that the “baby boom” generation will retire en masse. According to a variety of forecasts, in the next 75 years, the money prepared by the government for Social Security and Medicare will fall short by about $40 trillion. And the bout of unemployment brought about by the economic crisis means that these half-century-old baby boomers will face cruel competition from younger and better educated people when they try to get jobs again.

In the golden age of the American economy, the baby boom generation was America’s economic backbone. The large profits they created led to a Social Security surplus that could be used to support other national projects. Nevertheless, currently Social Security faces an impending shortfall, the hardest-to-bear nightmare of the baby boom generation.

Some analysts suggest that the Social Security system is often like a trap since it uses the funds of new contributors to pay for old contributors’ returns. As long as there is an endless supply of new contributors, everyone is covered, but should the stream of new contributors dry up, this “trap” creates a disaster. Likewise, the Social Security system uses the production of current workers to pay for retirees’ payments. But, in the current situation, a large amount of workers have been laid off and, at the same time, a great amount of workers face retirement. So, this chain of funds may be on the verge of collapse.

Officials of the U.S. Social Security System say that in 2016 Social Security payments due will surpass the amount of funds being paid in, and if there is no improvement, the Social Security fund will run out in 2037. Further, Medicare last year slipped into a deficit and, according to current trends, the health insurance fund will run out in 2017.

A Social Security System Stretched Beyond Its Means

Data from the U.S. Internal Revenue Service shows that currently the income of Americans aged 50 and above is a combined $100 billion and that this demographic controls 67 percent of property in the U.S. But these are only statistics on paper. According to an investigation by the AARP, the adverse impact of the poor economy on the baby boom generation has been especially severe and nearly 40 percent of them must borrow and seek help from family, friends, or charitable organizations in order to get by. Among these, the most adversely affected by oil and food price inflation are those aged 45-54, followed by those aged 55-64. Many people have already stopped contributing to their retirement accounts.

The report released by the AARP shows that during the 16 years from 1991-2007, there was a sudden increase in cases of bankruptcy for those aged 55 and over and that the ratio of bankruptcies tended to increase with age. Further, in 1991, those ages 55 and over accounted for only 8.2 percent of Americans who filed for bankruptcy. By 2007, the proportion of middle- and old-aged people filing for bankruptcy had risen to 22.3 percent, with the proportion occupied by those aged 75 and older growing much faster, by 433 percent. The report specially noted that a law went into effect in 2005 that raised the requirements for filing bankruptcy and made the bankruptcy rate of the whole nation appear to decrease. But, even so, the rate of the elderly filing for bankruptcy in 2007 increased several-fold since 1991. Housing prices decreased. Retirement accounts shrunk. Effective wages decreased. Debt increased. All of this has already caused the 45-64 year-old baby boom generation to lately become a bankrupt generation.

Most Frightening, a Loss of Confidence

On the opposite side to this, an American’s average lifespan has increased, and living until 90 is not at all uncommon. But, in preparing for their retirement, Americans do not prepare as though they will live to 90. Many people only have ten years’ worth of retirement savings, so they suppose they will only live to 75. But according to the newest statistics, the average American lifespan is 78 years; therefore 50 percent of people can live to 80, 25 percent can expect to live even longer, and 15 percent will live extremely long lives. Thus, an investigative report by Standard & Poor’s also finds that Americans are in the midst of an “extreme risk of inadequacy” as far as retirement preparations.

The American Retirement Benefits Research Institute recently issued a retirement confidence index yearly report that confirms from another angle the pessimistic conclusions of the AARP. According to this report, last year the number of Americans confident they will maintain a comfortable living after retirement dropped from 27 percent in 2007 to 18 percent in 2008, the lowest recorded in the 18 years covered by the report.