While Social Security is part of our economic life today, that doesn’t mean we can take its future for granted. That’s one of the many problems now chopping away at the Social Security system’s solvency.
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As the Associated Press reported this week, there were more than five workers for every person receiving Social Security in 1960. Policymakers have an easy – and in the past non-controversial – way to redirect payroll tax revenues between trust funds that would allow Social Security to pay full old age, survivors and disability benefits until 2034. What’s next? Social Security for children?
In addition to ensuring it is financially stable, Social Security needs to be made more relevant to the world today. That’s why the board of trustees say that Social Security “now faces an urgent threat of reserve depletion, requiring prompt corrective action by lawmakers”, a polite way of warning policymakers to fix Social Security.
Based on three decades of surpluses in payroll tax collections, the retirement trust fund and the disability trust fund combined now are valued at $2.8 trillion.
For most retirees, Social Security accounts for the majority of their income, according to the Social Security Administration. A 19 percent cut would lower the average annual benefit to less than $10,000.
A majority of Americans say they have no confidence in the future of Social Security, even though 80 percent of them say they’ll have to rely on it in a substantial way once they retire.
Consistently, polling over the years has shown that Americans not only want Social Security to stick around – they actually expect to rely on it when they reach old age. The headline news following the release of the 2015 report earlier this month was that the Disability Program would likely go bankrupt next year.
Without such changes, Social Security will have to cut benefits by about one-third to stay in business, according to the actuaries. Most recently, Congressional Republicans targeted Social Security disability benefits, putting millions of disabled Americans at risk of steep benefit cuts that would force many into poverty.
The program is now fully funded until the year 2035 and able to pay only 75 percent of benefits after that.
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