HORNER: Baby boomers will transform the concept of retirement

By John Horner

In case you missed it, last weekend marked an important demographic milestone in our nation’s history. You may think that it was just the 65th anniversary of our victory over Japan, but demographically it was the beginning of the baby boomers retiring.

The baby boom generation — that 20 year increase in the birth rate following the end of WWII — covers a lot of ground in our nation’s history. The first boomers served in Vietnam; some of the latecomers are still serving in Iraq and Afghanistan. But the boomers are more than just a demographic phenomenon; they have also proved to be a social and cultural phenomenon as well. Few would deny that the boomers transformed much of our society — from music and art to sex and politics. And now, they threaten to transform the concept of “retirement” as well.

Much of their transformation of “retirement” will be forced on boomers simply by the fact of their demographic bulge in the population. Except for the 20 years in which the boomers were born, birth rates have steadily declined in our nation since the start of the Twentieth Century. Add to that trend the increases in longevity over the last 80 years due to medical and nutritional advances, and we will become demographically more top-heavy over the next 20 years, with a higher percentage of senior citizens in the population. This demographic shift will change Social Security (and Medicare), because there simply will not be enough working men and women to support these programs, unless something is done.

You may have read last week that Social Security reached the break-even point this year-less is coming in through payroll deductions than is going out in benefits. This occurred primarily because of the economic downturn that started in 2007-lowering payrolls and forcing people to retire early-but it is a harbinger of things to come as the boomers retire. In order just to maintain Social Security at its current rate of benefits, boomers will have to take more and more out of their children’s paychecks to support the increasing proportion of retirees on Social Security.

Unless boomers want to be the first generation that wishes less for their children than they had, this is an unpalatable option. Past solutions to this impending crisis have focused on using payroll deductions from Social Security to invest in the stock market. If the past three years on Wall Street haven’t demonstrated the fallacy of this approach, then let me remind you that Social Security isn’t a savings account that you put money into and withdraw it when you reach retirement.

Social Security is a pay-as-you-go scheme, in which those who are working pay the benefits for those in retirement. If we were to somehow convert Social Security into an individual savings or investment plan, who would pay for all those currently receiving benefits? Add to that the fact that currently most people receive much more back from Social Security than they ever put in, and the investment solution begins to look like a plan that only Wall Street would love.

So now is the moment to reform Social Security so that boomer cannot break it, but reform it in a way that will preserve all the essential elements of the system. After all, Social Security is a program that has done much to improve the welfare of senior citizens. In 1935 when Social Security was implemented most seniors lived below poverty level; today seniors are the segment of the population with the smallest percentage living in poverty.

Many boomers are already thinking along these lines as they plan for retirement. And, we should. Many of us have had more opportunities and benefits — educational, health, job-from our nation than any other generation before us. Now is the moment to recognize that fact, and give back. I’ve argued that as longevity increases so should the age of retirement, but changes to the retirement age need to be tempered with a recognition that some jobs simply cannot be done at advanced age.

Regardless of the solutions we find to fix Social Security, boomers are about to change retirement — as they have changed just about everything else.

Readers can e-mail the author at: jm.horner@yahoo.com