Social Security’s Future

While all’s not rosy, all’s not lost for Social Security beneficiaries long term.

The most pervasive rumor and myth about Social Security is that it is going to disappear, if not for you, then for your children.  The good news is that its imminent demise is greatly exaggerated.

Social Security’s trust funds are forecast to be depleted by 2033 to 2037.¹ After that, continuing social security taxes are expected to be enough to pay 75 to 80% of “promised” benefits, unless needed changes are made before then.

With the slow-as-molasses progress of anything in Congress, now is the time that our Representatives and Senators should be working to shore up Social Security and implement long-term solutions.

2035 is only  16 years away, after all.

Putting that into perspective, that’s just 4 presidential election cycles.

Surely that’s enough time for changes to be made in Social Security to prevent adverse impacts to aging beneficiaries – the sooner the better to ensure that any changes have time to improve the health and viability of the trust funds.

Americans are living longer and having fewer children, resulting in an aging population. Today, as workers of lower-birth-rate generations replace those of the retiring baby-boom generation, 16% of Americans are 65 or older.  By 2040, this is projected to increase to 20%.²

This places additional strains on the system.

As the trust funds approach depletion, the rising percentage of older more-likely-to-vote constituents  should  increase the political pressure for making realistic changes to the system.

“In the 2016 presidential election…, 71 percent of Americans over 65 voted, compared with 46 percent among 18- to 29-year-olds, according to U.S. Census Bureau data.”³ Antagonizing older American voters dependent on Social Security is not politically smart.

Some suggested changes include:⁴

• Reducing benefits
• Raising the ceiling on income subject to Social Security tax ($132,900 in 2019)
• Raising the Social Security tax rate (currently 12.4%, split evenly between employee and employer, unless you’re self-employed)
• Reducing the cost-of-living adjustments (COLAs) that help the value of Social Security keep pace with inflation
• Raising the full retirement age

Most beneficiaries will be opposed to reducing benefits or COLAs.  The other potential changes would be more palatable for those already receiving benefits and, by delaying implementation, for those soon to sign up.

One idea I haven’t seen is raising the age at which one can start receiving early retirement. For those born after 1960, full retirement age is 67, while early retirement age is 5 years earlier at age 62.  If the full retirement age is slowly raised for people born after, say, 1969, raising the early retirement age to maintain the 5 year difference between full and early retirement would seem to make sense.

For the near term, there’s no need to worry.

But further out?  Washington needs to do its job for its seniors!

1. The 2018 OASDI Trustees Report says 2034.  OASDI is the Old Age, Survivors, and Disability Insurance Program is the official name for Social Security in the United States. (accessed June 16, 2019)
2. Coping with the Demographic Challenge: Fewer Children and Living Longer – Social Security, Office of Policy (accessed June 16, 2019)
3. The Immense Power of the Older Voter – AARP, April 30, 2018 (accessed June 16, 2019)
4. 4 Social Security Myths That Need to Die – The Motley Fool, June 15, 2019 (accessed June 16, 2019)