- [Narrator] You're looking at
a chart of the US population, and these are the baby boomers. This year, a record number of them will reach
traditional retirement age. By 2030, they'll all be 65 or older. This is creating a fiscal problem because fewer taxable
workers means less money for social security. - If Congress does nothing,
we're gonna hit a major crisis. - [Narrator] Here's how
this demographic shift threatens the future of one of the country's most
important government programs and what can be done to fix it. Baby boomers or those born between 1946 and 1964 have been propping
up the US economy for decades. - Their mere numbers
contributed for a long time to rapid economic growth and because every worker
contributed social security that made social security
look very healthy. - [Narrator] But as boomers
started exiting the workforce in 2008, the number of
retirees grew rapidly. - Not only do you have more
retirees collecting benefits for more years, you
have fewer young people entering the workforce
because birth rates were lower for their parents' generation, and that creates a squeeze
on both directions. Higher expenses from all
those retirees living longer, lower payroll tax revenue from fewer people entering the labor force because of those declining birth rates. - [Narrator] This puts a lot
of pressure on social security and without policy change, projections show the trust
funds will be depleted in 2034. - There's a misconception out there that when the social security
trust fund is exhausted, the system is somehow
bankrupt and there's no money. Social security is an integral part of the federal government, and as long as the federal
government is not bankrupt, social security is not bankrupt. - What's really happening is
the program is running out of treasury bonds, which are basically IOUs
from the government. For many years, social security
was taking in more money than it needed to pay out in
benefits, so it lent money to the government to
use for other programs, and it got IOUs in return. - Around 10 years ago though,
that situation flipped around. For the last decade, we've been
paying out more in benefits than we've been collecting
in social security revenue. - [Narrator] But because the program had so many IOUs stashed
away from previous years, it's been able to keep
paying benefits in full by cashing in on those IOUs. - Right now, there's
roughly $3 trillion in IOUs, but each year that $3 trillion stash gets a little bit smaller. By the year 2034, all of the
IOUs will have been cashed in. - That means retirees would see overnight about a 25% benefit cut. - [Narrator] This number will
likely increase as the number of workers per retiree continues to fall. - Simply because we're not about to go bankrupt doesn't
mean there's no problem. There very much is a problem. - [Narrator] Studies
show that the majority of Americans rely on these
monthly benefits checks for retirement income. According to census bureau
data, about 50% of people between 55 and 66 years old
have no retirement savings. - Can you imagine right now if you had to take a 25% reduction
in your take home pay, you still have to pay rent. You gotta buy groceries,
you gotta pay utilities. - It's especially important for those who don't have college degrees, people on the lower end
of the income spectrum. - [Narrator] Fichtner says, when retirees have less retirement income, they also generally spend less money. - That means less economic activity. That means less employment because employers have to lay off people 'cause no longer is that money coming in. It's a ripple effect that could be basically a
senior induced recession. - But social security is only
meant to replace a percentage of a worker's pre-retirement income based on lifetime earnings. So as much as 78% for very
low earners to about 42% for medium earners and
28% for maximum earners. - This is three legged stool
we talk about all the time. It's supposed to be social
security is one leg, your employer provided pension is a second leg and your
personal savings a third. Well, social security
is financial challenges. We don't have pensions really anymore. About 10% of the population has pensions and then it's hard to save on your own when you've gotta pay off student loans and housing costs are so high. - [Narrator] About half of Americans do have retirement accounts
like 401Ks and IRAs, but those are all subject to market risk. - I hear a lot, well,
those are 65 year olds. Why do I have to worry
about the boomers today? Well, this impacts every
generation that's coming up behind. - They might not be asked to pay a slightly higher payroll tax. More important, they might be asked to work a little bit longer. - [Narrator] And like most
things in the economy, social security's funding
shortfall isn't an isolated issue. - It's one of the reasons
the federal budget deficits is as large as it is. It means that we have to borrow money, which means issuing bonds. That tends to put up
pressure on interest rates, which means it's harder to afford a house. It means that Congress might have to cut spending on other
programs like the military or the environment in order to make sure that there's enough money
for social security. - [Narrator] So what needs to
happen to put social security on more sound footing? Congress needs to pass a law. - Congress has stood still and not enhanced social
security since Richard Nixon. - [Narrator] When and what kind of law, that we still don't know. There's been a number of proposed
solutions over the years. - This legislation demands that the wealthiest people in this country start paying their fair share of taxes, - But policymakers generally
disagree on whether to raise taxes or cut benefits. - You'll have two approaches
to how to solve this problem, and you're not gonna do it. - There's probably no single magic bullet, which will put social security
on a long-term footing. Instead, Congress is
probably going to have to look at a variety of steps which will collectively fix the problem. - [Narrator] But economists
don't expect action to be taken anytime soon. - Everybody, including on Capitol Hill, knows that social security has a problem. Nobody, especially those in Capitol Hill, are prepared to do anything about it. - As we all apparently
agree, social security and Medicare is off the books now, right? They're not to be smart.
(clapping and cheering) - We all would wish that
politicians would show the political courage
necessary to tackle this now and not wait until the 11th hour. Benefits and changes to retirement programs
take a while to phase in. One of the last major reforms we had for social security were the 1983 reforms. - [Narrator] Those amendments
raised the retirement age to 67, but it took nearly
40 years to phase them in. - There is a 10 year window, but we don't have 10 years to act. - There has to be some kind
of a legislative solution that comes along between now and then. By law, the program can't
borrow anywhere else. The program's too important,
too popular for it to basically be allowed
to run out of money.
