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The Millennial Predicament — Maura Pennington

Some may say our nation’s youth are entitled, but when it comes to millennials and state entitlement programs there’s another worry: what will happen when benefits can’t be paid out?

I spoke with Bloomberg analyst Neil Grossman about his recent study on Generation Y and the lopsided nature of Social Security, Medicare, and Medicaid. Here is part of our conversation for Forbes.com:

What can young people expect as unfunded liabilities grow?

Grossman: Young people already find jobs hard to get, are paid lower on a relative basis to prior generations, and have lower expected earning trajectories over their working careers. This is slowing household formation. This also makes it harder to save and invest for the future, which implies that long term returns on assets will be lower—Millennials won’t have the savings to pay for them—which will actually put further stress on a retirement system that relies on high returns for funding.

What can Millennials do to turn this around long-term?

Grossman: For Millennials, the solution I think is most appropriate is to seek lower benefits and to insist that seniors bear a far larger part of the actual cost of the benefits they receive. The biggest issue is that these programs are true political hot potatoes. The biggest voice wins and seniors and Boomers have loud, powerful vocal chords. Millennials need to counter this—the sooner the better.

It’s been almost 10 years since President George W. Bush outlined a proposal for the partial privatization of Social Security. We knew this was heading our way even before that. Yet Grossman predicts that little will be done for the next 20 years or so. When do you think there will be enough political will to address the issue?

  1. Bryan G. Stephens

    Never. At some point the money runs out, and promises are broken, money is printed or something else happens. There is now more than the GDP of the world in a year owed by the whole nation.

    It will continue until it can’t.

  2. Frank Soto
    C

    There will be only minor tweaks to Social Security over the next few decades.  I expect us to inflate away most of the unfunded liabilities.

  3. Bryan G. Stephens

    Kevin Williamson’s book on this is pretty interesting.

  4. True Blue

    I agree with Bryan.  It will never change.  The demographic changes in America will increasingly turn our economy into one that resembles Latin American economies.  What does Argentina do when this happens?  They either default or debase their currency (which is really a kind of default de facto if not de jure). This will probably occur before GenX retires let alone millenials.

  5. Z in MT

    We just need to watch what happens in Europe to see what will happen here.  Look at what happened in Greece.  Italy is next, then France.  The Baby Boomers get through retirement but will break the bank, the Gen X’rs will have to work much longer, and the Millenials will have to pay for it all in a lower standard of living.  The Millenials will be the mirror opposite of the Greatest Generation, pretty easy childhood and young adulthood – very difficult later work and retirement years.

  6. Annefy

    I would gladly forgo my SS benefits if my kids could opt out.

  7. Bryan G. Stephens

    Z in MT:

    We just need to watch what happens in Europe to see what will happen here. Look at what happened in Greece. Italy is next, then France. The Baby Boomers get through retirement but will break the bank, the Gen X’rs will have to work much longer, and the Millenials will have to pay for it all in a lower standard of living. The Millenials will be the mirror opposite of the Greatest Generation, pretty easy childhood and young adulthood – very difficult later work and retirement years.

     Good way to put it.

  8. Mark Wilson

    I’m doing the best I can to save for retirement with the assumption that Social Security will not exist.

  9. Maura Pennington
    C

    Mark Wilson:

    I’m doing the best I can to save for retirement with the assumption that Social Security will not exist.

     I think many people are.

  10. Nick Stuart

    Milennials will get what they get, because they vote the way they vote. If they want to change that, they’ll have to change the way they vote. 

    I tell my kids “you’re getting screwed.” Two of them agree, and two of them pay not the slightest bit of attention.

    Having a president in favor of same sex marriage, abortion at any time for any reason, free contraception, etc. was evidently more important than fiscal probity. 

    Trying to explain to Milennials that there is no money in Social Security, that they don’t have an “account” that belongs to them, and they’d be infinitely better off with privatization is like trying to explain Fermat’s Last Theorem to truculent 12 year olds who just want to hang out with their friends.

    The Milennial’s choice in 2016 is grow up or stay stuck on stupid. It will be interesting to see what they pick.

  11. PHCheese

    There is absolutely no reason for concern about SS. The cure is ObamaCare.  With ObamaCare no one is going to live long enough to collect Social Security. If they do there is always the death panels.

  12. Mark Wilson

    Maura Pennington:

    Mark Wilson:

    I’m doing the best I can to save for retirement with the assumption that Social Security will not exist.

    I think many people are.

    I am actually vested in my company’s pension plan, too.  I hired in just before they stopped offering it.  Who knows what it will be worth when the time comes.

  13. Matthew Gilley

    If I were dictator, I would see to it that the Boomers take it on the chin. (Yes, even the “responsible” ones.)

  14. RushBabe49

    I turn 65 tomorrow.  I do not intend to ever retire (stop working and collect “benefits”).  I have not registered for Medicare, nor do I intend to register for Social Security.  You Gen X’ers and Millennials, thank me for not drawing my share of your earnings.  If I could have but one wish, it would be to not have to pay payroll taxes, once I have reached “full” retirement age and remain in the work force.  Ahhh, in my dreams!

  15. Michael Minnott

    It’s nice to daydream and imagine that people will do the responsible thing and roll back entitlements.  Unfortunately, history shows that people will cling to those entitlements even as they are inflated into worthlessness.

  16. Misthiocracy

    Maura Pennington: It’s been almost 10 years since President George W. Bush outlined a proposal for the partial privatization of Social Security…

    Republicans shouldn’t have used the word “privatization”.

    The Canada Pension Plan is (arguably) solvent today because in 1997 the (then Liberal) federal government created the Canada Pension Plan Investment Board as an independent body to invest CPP funds in the securities markets.

    Admittedly, this isn’t the same as what Bush proposed, but effectively it was still a “partial privatization”, and they never would have been able to get it through the gauntlet of left-wingers if they’d promoted it as such. “Privatization? Dear me, no! We’d never do that. Only Tories believe in privatization!”

    https://en.wikipedia.org/wiki/CPP_Investment_Board

  17. DocJay

    No career politician will ever address the problem until fiasco is evident.  Have fun with the ride.

  18. Bulldawg

    For all the blather about the greatest generation, it needs to be recognized that that generation is the one that saddled us with this mess.  My grandfather repeatedly told me that you cannot trust government, any government, because its promises are worthless.  He also gave all his social security money to his grandchildren knowing that we’d never see it.

  19. Richard Finlay

    Mark Wilson:

    I’m doing the best I can to save for retirement with the assumption that Social Security will not exist.

     This is what I have done my entire working life — also called “living below your means.”  My worry now is:  having built up a retirement fund which ought to be adequate, the feds will find it expedient to tax it all away in some manner, throwing me back into dependence on the “safety net” I have sacrificed to be independent of.  I really never believed SS would last until now.

  20. Instugator

    RushBabe49:

    I turn 65 tomorrow. I do not intend to ever retire (stop working and collect “benefits”). I have not registered for Medicare, nor do I intend to register for Social Security. You Gen X’ers and Millennials, thank me for not drawing my share of your earnings. If I could have but one wish, it would be to not have to pay payroll taxes, once I have reached “full” retirement age and remain in the work force. Ahhh, in my dreams!

     

    You know there is a penalty for not signing up for Medicare don’t you?

  21. Donald Todd

    Instugator:

    RushBabe49:

    I turn 65 tomorrow. I do not intend to ever retire (stop working and collect “benefits”). I have not registered for Medicare, nor do I intend to register for Social Security. You Gen X’ers and Millennials, thank me for not drawing my share of your earnings. If I could have but one wish, it would be to not have to pay payroll taxes, once I have reached “full” retirement age and remain in the work force. Ahhh, in my dreams!

    You know there is a penalty for not signing up for Medicare don’t you?

    RushBabe49, the penalty is that you’ll have to address the IRS, and the IRS will collect one way or another.

     

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