An Approach for Solving the Coming Financial Crisis in Social Security (Economic ARTICLES‪)‬

ABSTRACT Although Social Security contributions have increased by 961-fold since its inception in 1938 (60-fold, even after adjusting for inflation), more retirees, longer life-expectancy, increased benefits, and relatively fewer FICA workers have offset these increases. The projected $560 billion in OASI taxes in 2004 will take care of this year's retirement payments, but demographic reality will result in outflows exceeding contributions by the year 2018 and a complete depletion of the Trust Fund by 2044. Bipartisan commissions have tried to avert the financial crisis by adjusting the policies and formulas, but the "fixes" have been compulsory and not fully effective and have been a disincentive for people who are otherwise compelled to participate. An average worker deferring retirement for one year is better off by $16,411 (considering net wages), and the government is better off by $22,343 for that year (with deferred payments and more taxes). These numbers create large incentive opportunities.