Bad News for Social Security: We're Living Longer

December 8, 1999

In a report to the Social Security Advisory Board, a special government commission has concluded that Americans are likely to live longer in the future than predicted, making Social Security's financial prospects even worse than previously estimated.

The panel of actuaries, demographers, and accountants, chaired by Eugene Steuerle of the Urban Institute, concluded that life expectancy will increase by at least three years more than previously thought, more than offsetting gains from reduced inflation and higher economic growth. As a result, Social Security will be forced to increase taxes or reduce benefits much more than under previous assumptions.

There is only one alternative to raising taxes or cutting benefits. By investing Social Security funds in real assets through individual accounts, workers can take advantage of the power of compound interest and the higher return from capital investment. The new report on longevity only goes to confirm the unsustainability of the current pay-as-you-go Social Security system. It should serve as a wake-up call to Congress and the president.

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