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No more Social Security at 62?

By Jennie L. Phipps · Bankrate.com
Sunday, June 2, 2013
Posted: 7 am ET

The Social Security Board of Trustees released its annual report Friday on the financial health of both the retirement and the disability trust funds.

The report projected that the retirement trust fund will be depleted in 2033 -- unchanged from last year's projection. It said that unless Congress acts, at that point the program will be able to pay only 77 percent of promised benefits from ongoing contributions. The disability trust fund will be depleted much sooner -- in 2016 -- when the program will be able to pay only 80 percent of promised benefits.

Other statistics from the report that you might find interesting include:

  • More than 57 million people were receiving Social Security by the end of 2012.
  • In 2012, approximately 161 million people paid payroll taxes on earnings covered by Social Security.
  • The total money held in reserve by the program rose by $54 billion in 2012 to $2.73 trillion.
  • The cost to administer the program in 2012 was 0.8 percent of total expenditures, a total of $6.3 billion.

A few days prior to this announcement, Donald Fuerst, senior pension fellow at the American Academy of Actuaries, testified before the U.S. Congress about Social Security's pending shortfalls. He said that in 1940, when the new Social Security Administration began paying monthly retired-worker benefits, the retirement age was 65. At that time, workers who survived to age 65 had a remaining life expectancy of 12.7 years for men and 14.7 years for women. By 2011, life expectancy at age 65 was 18.7 years for men and 20.7 years for women, an increase of six full years for both.

What you should know about social security benefitsIn 20 more years, life expectancy at age 65 for men is expected to be more than 20 years and more than 22 years for women, Fuerst pointed out.

The bottom line: If something doesn't change, we won't have enough money to pay the Social Security that is promised, a retirement planning disaster.

Fuerst offered Congress several suggestions for fixing this problem. His most controversial idea is probably raising the minimum age for collecting Social Security from 62 to at least 64.

Here's what he'd also do to make an increase in retirement ages less painful for workers:

  • Gradually phase in any change over an extended period of years, even decades, to allow for more time for society to adapt to the new work-life reality. "Give people time to plan and prepare. You wouldn't want to change it for someone who was planning to retire the next year. None of us would consider that fair," Fuerst says.
  • Reduce benefits for higher-paid workers. "Wealthier socioeconomic groups recently show more longevity improvements than poorer socioeconomic groups," Fuerst points out.
  • Revise the Social Security disability program. Make the requirements more lenient for people between ages 62 and full retirement age, so those in occupations that involve physical labor wouldn't have to continue to work at jobs they couldn't physically do.
  • Cut or eliminate the wage tax for both employers and employees for people between ages 62 and full retirement age. It would give an incentive to both groups to keep older workers on the job.

Will a plan this complex and drastic ever wend its way through Congress? Fuerst thinks it should, but he isn't optimistic. "It isn't going to be easy; there are too many competing interests," he says.

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1,721 Comments
dvanilla59
June 17, 2013 at 9:53 pm

People are dying every day of cancer etc., How could they possibly come up with these numbers.

MM
June 17, 2013 at 9:48 pm

Theophilous - too drastic. The government takes 10s if not 100s of thousands of dollars out of our paychecks. It's not a 100% gift for others but to also pay back the donar (think of it as an annuity). Means testing is a joke. Because someone doesn't overspend and lives financially within his/her means shouldn't turn into a punishment at the social security line. This will only encourahe people to save less and become a greater burden on society as they age. The penalty to take SS at 62 is severe and it would seem that the majority will not live long enough to breask even with a normal retirement benefit. Raising the SS cap has merits and possibly phasing in a higher retirement age too.

Daniel
June 17, 2013 at 9:42 pm

@Jerry, a couple of things do not sound right. Social Security has quit to a very large degree considering drug and alcohol addiction a disability. Your relative may be receiving Disability due to PTSD that was caused by his incarceration. About not paying for school. You leave out a lot of details but if your relative applied for and received normal Stafford loans his pre-existing reason for being on disability cannot be used as a reason to have his loans discharged. In any case if his loans were discharged he would then owe the IRS taxes on this "windfall" he received. Typically you need at least 10 years of earnings to receive Disability. Like I said, many things do not add up. I answer not to confront but a post like yours stirs up bad feelings towards people who are properly using the Social Security Disability system.

Theophilous
June 17, 2013 at 9:29 pm

For those of you who are saying that you paid into a social security savings account, simply put, you are wrong.

The money you paid into the system was paid out to those that were collecting since the 1930's when the system was put in place. So long as there was an excess of working people compared to those that collected, everything was fine. In fact the surplus of funds was "borrowed" by congress and used to fund programs that they refused to fully fund via taxes. The money we paid in was replaced by IOU's or treasury bonds. A promise to pay more money at a later date.

There is no social security "lock box". There is no savings account with your name on it. Social security is in effect a ponzi scheme.

So how do we fix it?

1 - Means testing for collecting benefits.

If you have an income or resources such as a retirement fund, 401(k) or annuity of a certain value or above, you are ineligable to collect. As you spend down your savings, you should be able to reapply and have a determination made of your eligablility based upon your circumstances at that time. But an automatic check simply based upon your age, sorry, we can't afford that.

2 - Raise the minimum age for collecting.

As it currently stands you can collect partial retirement benefits as of 62. We need to raise this to 65 with full benefits being paid if you retire at or after age 70. In this way we reduce the amount of time that beneficiaries collect and maximize the amount of time that payments are made into the system.

3 - Eliminate the Social Security cap.

As it is now social security taxes are only collected on up to 113,700 dollars of income. Above that level no additional taxes are owed. Let's remove that cap and collect the 6.2 percent on all income, and on all forms of income. Not just wages, but interest, dividends, etc.

4 - Limit cash payments to only those that came legally to this country.

If you entered this country illegally, you should be barred from collecting any amount of money from federal, state or local governments. Further no social security payments may be sent to any address outside of the US. If you made it here, you should spend it here.

rick
June 17, 2013 at 9:25 pm

my wife gets only $9.00 after paying her A & B. and some people never worked and get full pay...

c henney
June 17, 2013 at 9:22 pm

well done, and y missed the issues.
there is no real return on what we began SAVING in 1956 . . .it all disappears into the general fund. the house we purchased increased in so-called value from $ 6,000.00 to ovr a million in 2013? we earning $ 399/mo now $ 2,300/mo
there should be no limit on the 12% we pay in, if buffet/opra/ Romney, Bloomberg paid the 12% on their earnings no prob.
adding on drug coverage w/o a plan to pay fr all those not previously paying the fee, same old republican bs?
medicare was great idea, but democrts did same non-sense no plan to pay fr all those who had nvr paid in?
the idea of increasing retirement age ought to have been done yrs ago, lots of LUCK. my wife and I still employed at 74 n75, dad worked full time till 91 . . . .

pbj
June 17, 2013 at 9:16 pm

I know a lot of people who get social security benefits and never worked at all. This is sad because I am 60 and worked for 12 years in the private sector and then went to college and got a degree in education. Because I am a teacher and have state teacher retirement, I will not be able to get any of my social security because SS considers my teacher retirement a windfall. What a joke.

chuck mcnulty
June 17, 2013 at 8:59 pm

The Idea of social security was to help when we got older so we paid into it everycheck I have for 40 yrs. still am who knew the government started the program so we would have the money.And now they not only stole our money thet want to steal our future all together if they can stop us from getting our money. I don't know how the rest feel but that will be a cold day in I worked my whole life for that money and I intend on getting it......

Jerry McLain
June 17, 2013 at 8:29 pm

I think that SS should be use as it was design for not for people that never paid into it. I personnally have a relative that never worked only did Drugs and is in his late 40's and is drawing SS because he is a drug addic. He was in Jail for 3 years came out and was put right on SS He went to school for something and was licensed and desided not to go to work and is now still not working and drawing SS. I mean he never Worked in his life and still doesn't yet he even took money to go to school for hair dresser and was offered jobs and turn them down. This is only one person and I have heard of a lot more that draw SS for being a druggy. That doesn't make sence to me. I could see maybe for a year to help him get on his feet but not a life time when I had to work 40 years and pay into it to get a monthly check.

toni e
June 17, 2013 at 8:07 pm

Social Security is not a gift or a hand out, it is something that people PAID for. It is money put away in a 'savings account' for the future but other people have been going into this account for decades and using the money for other things. This has nothing to do with Democrat or Republican, both parties have used this money irresponsibly for decades with no concern for the future. I personally think some of us might be better off putting our money in our own accounts - forget paying Social Security; at least we have control over how it's spent.

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