Strategies for the Social Security Safety Net

When the Social Security program began in 1935, President Franklin D. Roosevelt said it was not intended to be the only means of support for the aged but rather a social safety net. Subsequent generations, however, tended to regard Social Security benefits as a major part of their retirement funding.

Social Security’s role now appears to have come full circle. According to the AARP Public Policy Institute, the poverty rate for people over age 65 was just under 10% in 2009. Without Social Security, the rate would have been 45%. Members of the Baby Boom generation, some 77 million strong, are beginning to turn 65 this year. That group, known for spending, not saving, has been subject to a recent decline in the value of their homes and 10 to 12 years of securities markets that have returned nearly no equity growth, as well as historically low fixed-income rates. Today’s need for a social safety net is as great as in the Great Depression when the Social Security program originated. The difference this time is that its ability to pay full benefits beyond a 25-year horizon appears doubtful under current projections.