How Secure is Social Security?

Social Security’s problems–namely, life expectancy is increasing and the birth rate is decreasing.  This means that over time, fewer workers will have to support more retirees.  According to the SSA, Social Security is already paying out more money than it takes in.  However, by drawing on the Social Security trust fund, the SSA estimates that Social Security should be able to pay 100% of scheduled benefits until 2033.  Once the trust funds reserves are depleted, pay roll tax revenue alone should still be sufficient to pay about 77% of scheduled benefits.  This means that 20 years from now, if no changes are made, beneficiaries may receive a benefit that is about 23% less than expected. (Source: 2014 OASDI Trustees Report).

Possible Fixes

While no one can say for sure what will happen (and the political process is sure to be contentious), here are some solutions that have been proposed to help keep Social Security solvent for many years to come:

  • Allow individuals to invest some of their current Social Security taxes in “personal retirement accounts”
  • Raise the current payroll tax
  • Raise the current ceiling on wages currently subject to the payroll tax
  • Reduce future benefits, especially for wealthy retirees
  • Change the benefit formula that is used to calculate benefits
  • Change how the annual cost-of-living adjustment for benefits is calculated

Uncertain Outcome

Members of Congress and the President still support efforts to reform Social Security, but progress on the issue has been slow.  However, the SSA still continues to urge all parties to address the issue sooner rather than later, to allow for a gradual phasing in of any necessary changes.  Although debate will continue on this polarizing topic, there are no easy answers, and the final outcome for this decades-old program is still uncertain.

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