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Social Security needs fixing

By Jennie L. Phipps · Bankrate.com
Monday, April 23, 2012
Posted: 5 pm ET

Social Security's board of trustees reported this afternoon that the money in the pot earmarked to pay Social Security and Social Security disability insurance claims will be exhausted in 2033, three years sooner than it predicted last year.

At that point, based on projections of the number of people expected to be employed and paying into the program, there still will be enough cash flowing to pay 75 percent of benefits.

That's a shortfall, but it's the kind of shortfall that if it happened at my house, we'd be able to hunker down and figure out a solution.

If you're in the midst of retirement planning, look at it this way. If Congress does absolutely nothing, by the time a leading-edge 66-year-old baby boomer is 88 (or dead), the program could be searching for couch change.

There are solutions. Government actuaries calculate that the deficit over the next 75 years will be 2.67 percent of taxable payroll. In other words, if payroll taxes were increased by 2.67 percent, there would be no deficit.

That shortfall would be diminished if more people were working -- including Social Security recipients themselves, who as long as they are on the job, continue to owe payroll taxes. Figuring out how to put adults of all ages back to work is obviously key.

There also are other ways to reduce the problem, including raising the age of eligibility a little and changing the way cost-of-living increases are calculated.

The least painful fix for the largest number of people is removing the income cap, so people earning above $110,100 -- the current maximum -- continue to contribute. As the Strengthen Social Security campaign points out: "Today, people earning $50,000 per year contribute about 6 percent of that for Social Security, but people making $500,000 per year pay only about 1 percent. If we all pay the same rate, the system keeps going strong."

Gallup Polls going back 50 years showed and continue to show that if there is one thing Americans of all political stripes can agree on, it's the importance of maintaining Social Security much the way it is now.

The rising demand on Social Security should come as no surprise to anyone. Baby boomers have been aging in great numbers for the last 66 years. It's time to stop just moaning about the problem and fix it. We need Social Security -- our best retirement plan -- to be on solid footing.

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2 Comments
ginny
April 24, 2012 at 9:01 pm

So, if Social Security is going to be bankrupt by 2033, as recently predicted, won't this pressure us to retire even earlier, like 62 years, so we at least get SOME money b-4 the collapse ?????

This could then bankrupt it even earlier ??!!!

eieio
April 24, 2012 at 9:28 am

Please clarify something for me. In your paragraph There are Solutions:" ....if payroll taxes were increased by 2.67 percent, there would be no deficit" Then how come a certain party in congress demanded the 2011 2% payroll tax cut to be extended through 2012. FICA a.k.a. Payroll Tax is the only funding mechanism for Social Security correct?

It seems the reductions of 2% is fairly close to the 2.67% you propose. Perhaps the 2% FICA continued reduction on wages is a bad thing after all. The $80 extra a month in our paychecks is already gone for higher gas and food prices.

Oh, and the bit about removing the wage cap to include all income would go along to Social Security funding stability. Then Medicare shouldn't be going broke because there isn't a wage cap on income to fund that government program.

What we need is more people working thereby paying into the system and cut spending at the federal level especially duplication in govermental departments.