What in the World is going on with Social Security?
by Tim Tremblay
As the United States grapples with the Social Security welfare system, many Americans are concerned with their ability to retire. According to the Social Security Administration (SSA), the program’s trust funds are projected to be depleted by 2033. While this doesn’t mean bankruptcy, it does imply that incoming revenue will only cover around 76% of scheduled benefits, unless reforms are enacted. With that in mind, it’s important we know where we stand if benefits are reduced.
Social Security, established in 1935, was designed to provide financial support to retirees, disabled individuals, and survivors of deceased workers. It operates as a pay-as-you-go system, with current workers funding benefits for current retirees. However, demographic shifts have strained this model. The aging baby boomer population, coupled with declining birth rates, has resulted in a shrinking ratio of workers to retirees. In 1960, there were 5.1 workers for every Social Security beneficiary. By 2020, this ratio had dropped to 2.8, and projections indicate a future decline.
Another problem with Social Security is people are living longer. In 1935, when the program was established in the U.S., life expectancy was a little more than 61 years. Today the average life expectancy is 78.8 years. Reforms to the Social Security program are needed and necessary.
Politics Are a Big Problem
As the election approaches, the Social Security issue has become a political “hot potato.” Our own U.S. Congressman, Salud Carbajal, has claimed that Republicans want to “take away Social Security,” when suggestions are made as to how we might save the program that so many rely on in retirement. What Salud apparently doesn’t understand is this: either we have reforms or the consequences of doing nothing will take place.
Politics are a problem on both sides of the isle. Politicians in Washington, often influenced by big-money donors, tend to prioritize their own agendas over the desires of voters. Their positions frequently shift with the prevailing political winds. For instance, Joe Biden, who previously advocated for Social Security cuts, now expresses a desire to expand it. Similarly, Donald Trump, once a proponent of privatization and critical of the program, now criticizes fellow Republicans advocating for changes and cuts. Ron DeSantis, who previously hinted at altering (essentially cutting) the program for younger Americans, now condemns Nikki Haley for proposing to raise the retirement age for the younger generation. Politics must be taken out of the conversation if reforms are to be made.
Americans Love Social Security
Despite the divisive nature of politics, it appears that most people agree on the importance of a secure retirement. Numerous polls consistently demonstrate strong bipartisan support for Social Security in the United States. An overwhelming 90% of beneficiaries hold a positive view of the program. Additionally, 80% are against increasing the retirement age, and a majority advocate for higher taxes on the wealthy to fortify the system.
What Can Be Done?
Gradually raising the full retirement age is a commonly proposed solution. This would reduce the number of years retirees receive benefits, aligning with increased life expectancies.
An incremental increase in payroll taxes could bolster the program’s finances. However, this approach is politically contentious, as it directly affects workers’ incomes.
Some advocate for means-testing benefits, whereby higher-income retirees receive reduced benefits or none at all. This approach aims to focus resources on those most in need.
Allowing a portion of Social Security funds to be invested in market-based instruments could potentially increase returns, though it introduces risks.
As the election gets closer, the narrative is all about reducing immigration. The fact is that increasing legal immigration could expand the base of workers contributing to Social Security, helping to alleviate demographic pressures.
If the gridlock in Washington has you feeling hopeless, know that there are products in the marketplace that can act as a buffer in the event you are affected by a reduction in benefits. Talk to a qualified advisor to see if one of these solutions is a fit for you.
Social Security stands as a testament to our collective commitment to supporting one another through life’s uncertainties. While challenges abound, proactive planning and informed decision-making can help individuals navigate the complexities of this vital program. No matter what can be done to save Social Security, more Americans will need to take responsibility for their own retirement plans. And we must teach this to the next generation.
We need to face the reality of living longer. I have chosen to continue working rather than retire, I believe it is healthier for the soul to keep contributing, as able, to society. As a nurse, I have seen many folks decline rapidly when they stop working. Raising the age when one receives benefits makes the most sense financially and socially. Finally, I am well aware that the cost of care is very high at the end of life, so making healthy choices during working years is important.
Nice article! I appreciate the unbiased approach. I think our politicians are sensitive to the issue. The age limited was successfully raised in the past. We had plenty of time to plan when we were told that our benefits would be later than our parents.