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Social Security: No more excuses

By Jennie L. Phipps ·
Tuesday, July 29, 2014
Posted: 3 pm ET

The government Monday released its 74th annual Trustees' Report on the finances of Social Security.  The prognosis is stable for now, virtually unchanged from last year, but uncertain down the road.


© Bob Daemmrich/Corbis

The bottom line for the 95 percent of Americans who are either claiming or who will be eligible to claim Social Security: The combination of payroll taxes and interest income on surplus payroll taxes invested in U.S. Treasury bonds plus the surplus itself is enough to pay what is owed recipients in full through 2033 -- 19 years from now.

Someone who is 62 years old in 2014 would be age 81 by the time Trust Fund reserves are exhausted. At that point, the Social Security trustees predicted in this year's report that payroll taxes alone would be enough to cover 77 percent of promised benefits.

Theoretically, that could mean that some current retirees could face a Social Security benefit haircut of 23 percent toward the end of their lives. To someone receiving today's average benefit of $1,231, that would mean a cut of about $283 a month in current dollars.

Should you be fearful? No. Don’t worry. It's unlikely to ever come to that.

Congress: Make this a priority

In the first place, it's not all that hard to fix the problem. Donald Fuerst, senior pension fellow at the American Academy of Actuaries, has been updating the Academy's Social Security game that lets anyone juggle various ways to fix Social Security's potential shortfall. Give it a try; it's kind of fun. Whether you raise the payroll tax rate by a percentage point or two, raise the age of eligibility by a year or two, or raise the cap on income to be taxed well above the current $117,000 -- or some combination -- a balanced result can be achieved remarkably easily. All it takes is for the U.S. Congress to pick a plan and vote yes.

But as Fuerst says, "The Congress doesn't seem to want to take on difficult issues. They keep looking for gimmicks and easy ways to solve problems temporarily rather than fixing the long-term problems."

If anyone should be concerned about changes to Social Security, it is probably people who are 15 to 20 years away from retirement -- "the people retiring right about the time the trust fund runs out," Fuerst says.

If you are much older than that, he says, "It is unlikely that Congress will cut benefits for people already retired. Those people are OK."

If you are in your 20s or 30s, "You have a lot of time to adjust," he says. By adjust, he means you should add more money to your retirement accounts.

But if you are 40 to 55, "These are the people who would be most affected and have the least time to react."

If there's a looming shortfall in the family budget, wise people make the necessary adjustments as soon as possible to ensure that they remain solvent. That is what Fuerst thinks Congress should do.

"Putting off fixing Social Security just makes it a much harder adjustment. If we wait for 19 years to fix it, the tax increase or the benefit cuts necessary will be very substantial. If we deal with it sooner rather than later, we can do it with smaller adjustments," he says.

So, write to your Congressman. Give him (or her) a swift kick of encouragement to fix Social Security now.

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Dorothy Langley
April 19, 2015 at 6:40 pm

I find it highly offensive to hear any discussion about reducing benefits for those more affluent when that is the very group who are not getting percentage wise what they have already given to social security system. Any cuts should be the same percentage across the board, and social security should not be subject to personal income tax. It is too late in the game- and the giving- to deprive anyone 55 or older iof the benefits they were promised. To make system viable, simply tax all income- capital appreciation included- the same as other income. Use the increase in capital appreciation income to fund the social security burden for all citizens. Don't go for the donut hole and tax successful workers....if you want equity, tax capital gains like any other kind of income and use that source of revenue to fund the social security shortages.

Robert L Grove
April 16, 2015 at 4:22 pm

I recommend Congress eliminate the personal income tax regulations, and institute the plan. I would base the rate each of us pays on our income of two years prior.

Those who have not filed their return would be penalized by paying the highest rate until they are current with their fillings. And, they forfeit any excess amount paid. (This should be a good incentive to file timely).

Note: The website seems to have a glitch when it opens, but, the information does become available.

something else
April 16, 2015 at 2:00 pm

Please don't tax me more. I pay enough already. How bout we address the spending to keep people alive beyond their quality of life years? Comfort care is so much more humane and affordable. I don't want to be kept in a near vegetative state. Medicare will save dollars on me for sure, but don't decrease what I have paid into since I could work at the age of 16 and plan to pay/work until I'm at least 70 to 74 or maybe older, if at all possible!
April 14, 2015 at 6:35 pm

I only receive 1050.00 of SSDI and I quailed for either and both of these programs and I don't make enough to pay rent today. If I have to loose my benefits now I would be in real trouble I want to the tax raise slowly up until the once larger group of 1970 was that the only program was in the black I remember in my lifetime they raised the percentage rate was raised and I think that would be enough to help to bring the SS and SSDI to have enough to help with these funds.

Bill Frost
October 13, 2014 at 11:20 pm

I have thought for a number of years now that all income should be subject to SS taxation. It would completely solve the problem, and our seniors could be confident in the continuation of at least a minimum level of support. And yes, it would affect me, since I haven't been paying SS taxes since early August.

Kenneth West
September 10, 2014 at 11:54 am

The biggest fix coming to the SS system is the increase in minimum wage connected to inflation. Years ago it was decided to connect SS, SSD, SSI to inflation because they had fixed income, but as it turns out even the employed had fixed income. If the wages and salaries had actually kept up with inflation in the last 30 years there would be no national debt or SS problem. My SSD actually doubled between 1984 and 2008 while the starting salary for my previous profession, Electrical Engineer, remained the same, also the housing collapse of 2007-8 was caused by property values being double during this time frame.

August 22, 2014 at 11:15 pm

I'm sure some people will voice pros and cons about this, but discussion on this subject is welcomed.How about a once or twice a year "All State Lottery for S.S." Some monies from lotteries go to schools,why not social security? I would buy a ticket for the cause.Of course the details would have to be worked out on how much the winners would get by the decision makers. $1.00 for a ticket,it's worth it to me.