College Central®

Ask around. The Network works.®

Personal Finance
Plan for the future

Meredith Ritter & Lauren E. Elkins (Oklahoma Daily via U-WIRE)/NORMAN, Okla. -- College students today tend to be more concerned with plans for the upcoming weekend than whether Social Security will provide them with a secure future.

The problems of a struggling Social Security system are becoming more evident, even to college students.

"It's a train wreck waiting to happen, and it's going to be a day of reckoning," said Steve Scott, financial planning professor at the University of Oklahoma.

Students are not even thinking about saving because they have a "spend-first" mentality, Scott said. He said young adults have an immediate-gratification society.

The current Social Security system, established in the 1930s, was set up to provide people with money to live on after retirement.

Referred to as pay-as-you-go, this system takes money out of each paycheck and sets it aside for retirement benefits. However, Americans have been saying for years that if the system is not changed by the year 2029, taxes from workers will fall short of the amount of benefits paid per person, said Elizabeth Hirom. Hirom worked for Social Security for 21 years, and is now a self-employed Social Security disability consultant.

Hirom said because the work force has changed, the number of people paying per person has also changed. She said there used to be seven workers per person. Now, there are three.

Currently, the retirement age is being changed from 65 to 67 because of the rise in the retirement population, Hirom said.

Seventy percent of 100 OU students said they do not have a complete knowledge of Social Security according to an informal survey taken by The Oklahoma Daily. Fifty-six percent said they were unaware that funding for Social Security would be depleted by the time their generation is supposed to collect.

"It's not really something I thought I'd need to worry about until I was 40 or 50 years old," said Danielle Rush, psychology sophomore.

"College students just don't really spend much time worrying about retirement money. We're just trying to figure out how to pay the bills we have now."

The funding problem can be attributed to two factors. The first is the global demographic trend toward decreasing family sizes. In 1960, women were having an average of 3.6 children.

Now, women have an average of two children, and by 2020 it will be 1.9 children, according to Bruce Bartlett on the National Center for Policy Analysis Web site.

The second reason is that medical advances are lengthening life expectancy. People are collecting retirement benefits longer, and the retired population is increasing faster, Bartlett said.

What few college students know is that they will eventually be paying for the large generation of Baby Boomers, people born between the years 1946 and 1964.

"I wouldn't have a business if Social Security knew what it was doing," Hirom said. "I think they're idiots, and I have no respect for them."

Cynthia Rogers, public finance professor, said the "collecting" population of Baby Boomers is getting larger, while the "paying" population continues to get smaller.

Raising taxes and decreasing retirement benefits are two solutions that have been offered to resolve this problem. Students have mixed emotions about these options.

"I feel that overall it's a lose-lose situation," Rush said. "If taxes increase, our paychecks will slowly be depleted, and if retirement benefits are cut, the generation above us will suffer."

Hirom said no one wants to raise taxes, because they are already at a horrendous 16 percent for the employed worker.

Alex Lowther, letters senior and president of Students for Socio-Economic Change, said he doesn't agree that retirement benefits should be cut. But he sees no problem with raising taxes if it goes to a program that will be beneficial.

"As long as you give people an option to put money away, I think it's good," Lowther said.

Scott said that because senior citizens have a higher voting percentage than young adults, the government is more likely to raise taxes. They would rather increase taxes a small amount than decrease their benefits.

Of the students polled, 74 percent said they will rely on Social Security benefits, and have not made other plans that would guarantee a secure future.

Hirom, a self-employed consultant, said she doesn't think young adults think about Social Security until they are 45 or 50.

She said because people are living longer than before, they think they're invincible and don't have to plan yet.

"I think it's against human nature to save," Hirom said.

Carolyn Baldwin, economics junior, said she agrees that it is a nationwide concern for her generation, but unlike many students, she has begun to make plans for the future.

Baldwin said she has had her own Roth IRA plan for the past two years, and encouraged young adults to make investments to prepare for the possibility of Social Security failure.

Baldwin said students might consider two types of plans: the Roth IRA, an investment plan with tax-free earnings, and the 401(k), a salary deduction plan.

Rogers, public finance professor, said students should save early and save often.

"We just need to save to make up for the quality of life we want," Rogers said.

In President George W. Bush's recent presidential campaign, he discussed "privatizing" Social Security as an option to the current program. This would allow people to get 10 percent of their wages deposited by their employer each month in a pension savings account. The plan has not been voted on by Congress.

Scott said he thinks the plan has a definite possibility of happening, but believes it is a somewhat risky idea.

Rogers said that because the market goes up and down, it doesn't provide a safety net.

Rogers said people shouldn't count on basing a quality of retirement life on Social Security.

Hirom said she doesn't think the government will "privatize" Social Security.

"Eventually, it's not going to work," Scott said.

(c) 2001 Oklahoma Daily via U-WIRE

Return to top

The views and opinions expressed in these articles do not necessarily reflect those of College Central Network, Inc. or its affiliates. Reference to any company, organization, product, or service does not constitute endorsement by College Central Network, Inc., its affiliates or associated companies. The information provided is not intended to replace the advice or guidance of your legal or medical professional.