With her cropped silver hair and tan skin glinting in the Las Vegas sun, Joanne Oppenheimer, B.A. ’58, cruises from condo to condo while pointing out golf courses, restaurants and hiking trails. She’s showing potential buyers that they can leave behind the biting Midwest winters and live the good life in Las Vegas—and she should know. At 77 years old, she works as a Realtor for Century 21 selling homes and condos for luxury retirement communities.
Oppenheimer, who has worked since she was 15, is not entirely retired. But she lives in a 55-plus country club style community that offers retirees everything they could ask for after a lifetime of work: recreation, relaxation, social connections and healthcare facilities. “People want to live here because it’s upbeat, it’s for active adults,” Oppenheimer says. “And they want to give up their five-bedroom home in a cold climate.” Whether they’re moving for the year-round recreational opportunities or to live a maintenance-free lifestyle, one thing Baby Boomers thought they could count on was retirement. And in 2008, when the first wave of Boomers turned 62 and hit early retirement age, they collected their first Social Security checks.
Eighty million Americans were born from 1946 to 1964, and as a group they will qualify for Social Security and Medicare for another 20-plus years. This is the largest segment of the population to hit retirement in the history of the Social Security program, leaving a small segment of the population to pay into the system. With 90 percent of American workers contributing to Social Security, the Boomer retirement wave hits every generation in the pocketbook.
Now, a few years into this generation’s retirements, economists, researchers and workers are starting to understand the issues at hand: With so many people retiring, who pays the bill? And if that bill is paid, will there be anything left for future generations? Mary Daly, B.A. ’85, Ph.D., associate director of research and group vice president at the Federal Reserve Bank of San Francisco and a Social Security expert, says this is one of the emerging issues we’ll face as a country: There will be more and more retirees who are supported by relatively fewer and fewer workers.
Daly says it’s important to understand that Social Security isn’t going to run out of money tomorrow. “When there’s discussion about the unsustainable path Social Security is on, and how we’re not going to be able to pay benefits without taxing workers at higher rates, we’re not talking about benefits going from what they are now to zero,” Daly says. “We’re talking about the projected tax revenues falling short of projected expenditures as the population ages.” These revenues will decline, forcing the government to go from paying 100 percent of benefits to about 80 percent of outstanding benefits in a given year. So, we’re not going to fall off a cliff, Daly says, but the government will need to make changes to taxes or benefits. She estimates this issue will come to a head in the late 2020s—the height of the Boomers’ retirement.
With the political wrangling going on right now, Daly says the nation is going to have to make some decisions—such as how to take care of retirees with the promised benefits they expect and also take care of younger generations who support them. “We could do ourselves a favor and start thinking about those things and making the adjustments that are required now—either lowering benefits, adjusting taxes or changing the way Social Security or Medicare is structured,” she says. “But it is hard to start now when the solutions are to lower benefits or raise taxes.” The idea of lowering benefits—either raising the retirement age or reducing the amount paid to wealthier recipients—is not a discussion many politicians are willing to launch. Daly says Social Security is the third rail of politics, making it difficult for politicians to tackle: Touch it and you die.
Even if the government puts off finding a solution, Daly says the younger generation won’t be left with a big bill that can’t be split with the older generation. “But there will be some painful compromises,” she says. Possibilities include a younger generation that sees more income going to support an older generation, or a retiree generation that sees lower benefits than they expected.
Costs and compromises
Daly says she often hears younger workers voice concerns that they’ll have to bear the burden of paying for the aging population themselves. She acknowledges that this is an issue, but says that prior to the creation of Social Security, a large number of retired workers lived in poverty, especially women because they tend to outlive men.
Government estimates suggest that when Social Security began in 1935, close to 50 percent of the elderly population lived in poverty. By 1959, the rate had fallen to 35 percent but remained higher than that of other groups, including children and working-age adults. During the 1960s and early 1970s, Social Security benefits increased and poverty rates among the elderly declined rapidly. By 1974, the poverty rate for elderly Americans had fallen below that for children, where it has remained since. In 1993, it fell below the rate for working-age adults. Today, about 11 percent of the elderly have incomes below the federal poverty line.
Studies show that without income from Social Security, the poverty rate for the elderly would be much higher. The Social Security Administration estimates that 47 percent of individuals age 65 and older would live in poverty without Social Security benefits, four times as many in poverty today. Daly says Social Security’s poverty-reducing record—along with its inclusiveness—have made it one of the most popular social programs in history. “The value of that is something we don’t want to lose sight of,” Daly says. “We don’t want to move away from it completely. At some point younger workers will be older and want that kind of insurance.”
Another reason younger generations should care about older generations is because someday, they will be in the same boat. “If you don’t die, you’ll get old,” says Gloria Thomas Anderson, M.S.W. ’06, clinical instructor at UMKC’s Department of Social Work. “If you live long enough, you’ll reach that point in your life, and you don’t know what it’s like until you actually get there.”
Finding a middle ground
To better understand what a cross-generational compromise might entail, it helps to consider age expectancy. Americans now work more productively and longer into their lives than ever. “Raising the retirement age—if you were expecting to retire at 65 and now you’re retiring at 67—might not really be that bad,” Daly says. “You have more time after retirement than people did when Social Security was created.” Social Security used to guarantee six to seven years of post-retirement living because life expectancies were lower. Now it’s more like 15 to 20 years.
Because of longer age expectancy, the value of the benefits for older workers has increased and with it the burden on younger workers. “We’re supporting employees for longer periods of life when they’re not working,” Daly says. “That’s where compromise comes from. Boomers are going to have to see that they can’t have all that. And younger workers are going to have to agree to pay for some of it.”
After 62 years in the workforce and counting, Joanne Oppenheimer has never taken more than three weeks off of work. “I don’t think I’m owed anything,” she says. “I don’t think younger people are obligated to take care of me in my old age. A lot of us have been paying into Social Security since we started working. That’s a lot of potatoes. We just want what we’ve earned.”