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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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1,722 Comments
Urkson
June 18, 2013 at 7:37 am

My previous post should have read ...someone earning a million dollars pays approx. 0.7% of their salary.

urkson
June 18, 2013 at 6:55 am

It's simple. First of all remove the cap. The average American pays between 6% and 7% of their salary while someone earning $200,000 a year pays approx. 3.8% and someone earning a million dollars pays approx..07% of their salary.How is that fair.

Secondly, introduce a means test. Someone who has 10 million dollars in the bank doesn't need social security.

Thirdly, continue to raise the retirement age, we live longer we can work longer. Already people born in the mid sixties do not reach full retirement age until 67

You must remember social security is not an annuity program or an insurance program it is a tax. The Supreme Court has ruled on this several times on cases brought by foreigners who have legally worked in the US but have left before qualifying for social security (40 quarters)and have just asked for the return of their contributions which has been refused.

max
June 18, 2013 at 3:22 am

they consider social security they take from your check now is general funds. when its enception, those funds went into a fund that could not be touched by anyone except those who drew social security but congress got their hands on it and this is the outcome since they took it!! if we was to put DC in charge of the Sahara Desert, there would be a shortage of sand in 10 years and rationed.

rro
June 18, 2013 at 2:14 am

Hey people! I have a great question. What happens to all the money that is paid to the people collecting that only collected for 1 or 2 or ? yrs who died. Shouldn't that money stay in the fund? I would think so, it should be. I would not think that the gov. get's it, or DO THEY? I wonder!

rro
June 18, 2013 at 1:52 am

Wasn't that box so posed to be locked? What's up with that?

rro
June 18, 2013 at 1:43 am

It don't matter who started it, all that matters is that it's the government period, what ever side of the fence!

Voice of reason
June 18, 2013 at 1:29 am

Sam Pullara

Was there a president, after LBJ that put more in than he took out?

rro
June 18, 2013 at 1:25 am

There are a lot of people who are concerned about this problem with SS, including me. I also think that the money "MONEY PAID" that means; money paid into social security by "Hard Working Americans", should be the only one's to get the benefits, not people who did drugs and got messed up, or people who never worked, or people who never paid into it. Also, who ever is in this country illegally; no matter who they are. There is an exception, Someone who may have become disabled that had a family member who has paid into the system, then i could see them collecting a benefit
p.b.: It would seem to me, no matter what job you worked at, that took money out for social security, you should be able to collect it; of coarse i don't know what the law is on that. J: right on. Yes i agree, the government should pay back the money they borrowed with interest at the rate it was when they borrowed it.
In other words, the social security started,every person that worked paid into the so called system; So i don't see how they can say that they don't have the money needed to pay the people that paid into it; unless, they used the money for other things which should not of been used except to pay the people who paid into it. This program was to help people in their retirement years.
I too a'm about to retire in 2 yrs. I'll be taking the early retirement because nobody knows what's going to happen for sure, so i am going get mine while i can.

Voice of reason
June 18, 2013 at 1:25 am

1. Move social security fund out of the G fund, so that the funds can't be reallocated.
2. Freeze disability and survivor benefits, no new accounts for the foreseeable future.
3. Raise minimum social security age to 67. In 2014 raise minimum age to 63. In 2015 raise the minimum age to 64, continue until 2018 when the minimum age will be 67.
4. Reduce current social security annuitant accounts by 1%. Then increase the cut to 2% for annuitant accounts created in 2014. Increase the cut to 3% for annuitant accounts created in 2015. Continue this gradual reduction until you reach a 15% reduction in 2027.

Sam Pullara
June 18, 2013 at 12:56 am

ATTN Frank Wilson,

Actually Lyndon Johnson was the president with an overwhelming majority of democrats in the house and senate that first "borrowed" the cash in the social security lock box and replaced the money with IOU's. The federal government borrowing money from the federal government to be repaid by the federal government!
If this fraud was not a government activity they would have all be sent to jail. Every president since has done the same thing, but the Democrats started it.