Well, after the boomers have died, Generation X and the Millenials will demand their retirement package. The population age distribution will not become a pyramid with the next generations.
> just raise contributions a little bit
A little bit. Lol. In Germany the contributions are quite unpopular, too (and rightly so with 20% removed from your gross income), but the government just increased the tax subsidies over the years. Nowadays, they amount to about 30% of Germany‘s federal budget — on top of all the contributions. How much money do you think does a society need to pay for their retirees to make a redistributive pension system sustainable?
> See, even though you’re ostensibly investing money so you can retire later, what happens in practice is that your money is being injected in parts of the economy to fuel your investment. And ultimately, part of that money will be used to pay currently retired people.
No. You have a weird notion of how capital markets work. In a capital based system an individual saves for his retirement. Money is put aside every month and invested over a long time. The individual‘s money and its returns of investment are used to pay the pension.
You can make this a public system where everybody is forced to pay and even set up a national fund. It can be subsidied a little to support the poor when retiring.
This is how to render this system fair and sustainable.