:: Social Security Hits First Wave of Boomers
EARLEVILLE, Md. -- When Kathleen Casey-Kirschling signs up for Social Security benefits Monday, it will represent one small step for her, one giant leap for her baby boom generation -- and a symbolic jump toward the retirement system's looming bankruptcy.
Casey-Kirschling -- generally recognized as the nation's first boomer (born in Philadelphia on Jan. 1, 1946, at 12:00:01 a.m.) -- won't bankrupt the Social Security system by taking early retirement at 62. But after her, the deluge: 80 million Americans born from 1946 to 1964 who could qualify for Social Security and Medicare during the next 22 years.
The first wave of 3.2 million baby boomers turns 62 next year -- 365 an hour. About 49% of the men and 53% of the women are projected to choose early retirement and begin drawing monthly Social Security checks representing 75% of the benefit they'd be entitled to receive if they waited four more years to retire.
In 2011, they'll turn 65 and be eligible for Medicare. In 2012, those who didn't take early retirement benefits will turn 66 and qualify for their full share.
"Once it starts to happen, and it's going to start in January, you're going to see millions of baby boomers starting to take it," says Casey-Kirschling, a retired seventh-grade teacher and nutrition consultant.
By 2030, Social Security's caseload will be 84 million people, up from 50 million today. Medicare will go from 44 million beneficiaries to 79 million. That will leave barely more than two workers paying payroll taxes for every retiree.
The boomer retirements have demographers, actuaries and economists worried as they prepare for an estimated $50 trillion in future obligations over the next 75 years. Social Security will rise from 4% to 6% of the nation's economy. Medicare will go from 3% to 11%.
"This," says Brian Riedl of the conservative Heritage Foundation, "is the single greatest economic challenge of our era."
Medicare's hospital insurance fund now pays out more than it takes in. Barring action by Congress, Social Security will start doing so in 2017. In 2019, the hospital insurance fund is projected to run out of funds. In 2041, the Social Security Trust Fund will run dry.
All the while, Medicare's payments for doctors and prescription drugs are projected to rise faster than the nation's overall economic growth. Beneficiaries' premiums, deductibles and co-payments will rise faster than their incomes, the government says.
It's a coming financial implosion that Washington hasn't mustered the will to confront. Fixing Social Security solely with higher taxes or cuts in spending would mean a 16% increase in the payroll tax or a 13% cut in benefits. Medicare's needs would be far greater: a 122% payroll tax hike or a 51% reduction in spending, just for hospital care.
Each year action isn't taken, the prognosis gets worse and the cure more expensive. It's "the power of compounding," says David Walker, the nation's comptroller general. "Right now, it's working against us."
On this one issue, liberals and conservatives agree: It's an unsustainable path, it must be altered, and Democrats and Republicans must do it together.
"Partisanship on this issue is as foolish as a food fight on the Titanic," says Rep. Jim Cooper, D-Tenn. Adds Rep. Frank Wolf, R-Va.: "It's not red or blue."
So far Washington has done little.
President Bush and Congress cut taxes in 2001 and 2003, which has left federal revenue at a level that Walker says will not support promises to future retirees. Congress added $768 billion over 10 years to Medicare in 2003 by creating a prescription-drug benefit. Two years later, lawmakers nicked Medicaid's projected cost by $5 billion over five years, but the Congressional Budget Office still projects the program to grow by about 8% a year.
