"There are many baby boomers today who rely heavily on Social Security to make ends meet in retirement. And there's a reason for that. Pensions were very common when baby boomers started their careers. Through the years, though, a lot of companies did away with pensions, shifting the burden of retirement savings onto individual workers. Some boomers were able to pivot and get on board with saving for retirement in a 401(k) or similar workplace plan."
"Social Security is facing a funding crisis because baby boomers are wrapping up their careers and exiting the workforce. Social Security relies on payroll tax revenue to keep up with its financial obligations. As boomers stop paying into the system and start filing benefit claims, it creates a major strain. Social Security has money in its trust funds that can be used to help keep up with benefits."
Many baby boomers rely heavily on Social Security because employer pensions were common early in their careers but later disappeared, shifting retirement responsibility to workers. Some boomers saved in 401(k)s or similar plans, but many did not, leaving Social Security as primary income. Payroll taxes from current workers finance benefits, so large boomer retirements reduce incoming revenue while increasing claims. Trust funds provide temporary reserves, but depletion would force benefit reductions unless revenues are increased or benefits reformed. Younger workers will continue to pay into the system but are unlikely to fully replace retiring boomers, making benefit cuts possible without legislative action.
Read at 24/7 Wall St.
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