It always surprises me how often projections use assumptions that hinge on unnecessarily inflexible 'rules' to lead to extreme circumstances. (Common ones around here are things like with a 4% SWR you have a 5% chance of running out of money, its not like someone comes up to you one day and says the money is gone and you're surprised....slight adjustments can solve the issue).
So SS will be 20% underfunded. If you move the "full" retirement age back a year for certain generations (you could still retire at the same age you want to after 62, it'll just pay a little less) & increase payroll taxes from 12.4% to 13.4% (has a lot less effect than annual raises & inflation), you've probably just fully funded it and I don't exactly seem those as extreme measures as these numbers have moved before, and we all know people are not only living longer but capable of working for longer. If you just remove the payroll cap but don't increase the payout max you'd more than fully fund it, and given the loud call against income inequality lately I could see that happening as that will directly attack inequality, etc, etc.
Or maybe none of that is done and SS benefits will be reduced by 20%. I have hard time believing most people know what their benefits will be within 20% before they start receiving it anyway.
And in the end we're probably just looking at little bits of all the above being done (e.g. look at things like the 0.9% additional medicare tax that was created to help that problem).
Now there - you see - you fixed it! Thanks - brilliant! Next...
It really is that simple to fix, but unless the baby boomers finally wake up and push for some changes it may not happen. I can understand why the Millennials seem to think Social Security would go bust. They've been inoculated with those myths from day one.
The thing that was glaringly missing from the article was a link to proposed legislation/bill that is already written up but hasn't made it to the floor yet. Beyond that, this is the most informative article I've seen on SS in a long time.
Thanks for posting it, OP.
I paid in 100% not 79% of what the government
asked forced me to pay for my entire working life. If they want to do away with the program so badly - fine, just give me back what I already paid in, with interest and I'll walk off into the sunset.
Or maybe none of that is done and SS benefits will be reduced by 20%. I have hard time believing most people know what their benefits will be within 20% before they start receiving it anyway.
Sad, but oh so true for most of the baby boomers I know. Shoot, mine turned out to be twice what I thought it would be. For some it is a rough awakening to poverty in retirement because you know, we were promised that SS is a sure, reliable thing - no mention of "entitlement" and grrr "welfare" program.
I saw it as a nice, guaranteed supplement, not as my only retirement plan, but you bet I do feel "entitled".
Ironically, I find that it is the people who are well off already who are financially savvy, like on MMM, who look into SS long before collection time.
SNARK - If the rich insist that this is in truth a welfare program then I suggest we have a lottery once a month where they give up their SS "entitlement" and some lucky poor sod gets to reap their benefits instead.
I resent the idea that receiving SS makes me a welfare recipient when I am the one who paid in. That's perverse!
I am not on board with raising the age of eligibility again - who the hell is going to employ 65-year construction workers or receptionists? How many will be healthy enough to continue working?
Just because we live longer, does not mean there is employment available or possible - age discrimination is real and in some cases defensible.
I really hate to see all the things they are doing today to throttle the program now. Like years without COL - hello, you don't think rent and food prices went up? Stagnation of benefits screws us over by arbitrary changing the rules - after the politicians robbed the program blind by using it's excess to fund other programs.
In answer to jrr85
Maybe it'd make sense to just compare the entire federal tax burden, but it certianly doesn't make sense to look at social security in isolation.
All they had to do is leave the social security program alone - untouched. Had it remained in isolation it would be paying us at least 21% more in 2034 instead of a projected 21% less.
Forgive me if this was taken slightly out of context, but I thought it supported a point I wanted to make.
This intergenerational squabbling should have politicians in alt because it is completely disguising the fact that if the program had not been robbed it would do well for all future generations for a long time to come.
I can see that in the future due to AI and robotics - robots aren't exactly "entitled" nor do they pay SS taxes, but given the possibility of a universal income - SS may be replaced - as future realities change.
It may well make sense to scrap the program and start over, but then again if it can be tweaked to address the new and different challenges of the next generations ...