Reports are that more than half of the population stresses on whether or not the Social Security System will be healthy enough to sustain them when they reach retirement age. Is this a realistic fear? By the end of 2018, Social Security’s reserves amounted to $2.9 trillion and a payment has never been missed. Yet there are consistent negative headlines bombarding us of Social Security’s imminent failure even though in reality the program is solvent.
Do not let worries about Social Security lead you to file early. You may be tempted to file early with an attitude that you better get in before it’s too late. However, once you do this, you will subject yourself to a permanent lower payment. Those who may be affected more keenly would be the current younger workers and those retirees with lower incomes. Without changes to the existing program, it is very likely that payroll tax receipts will only be able to cover 80% of the payments. The funds would be depleted by 2035.
What is causing the strain:
- the labor force growing at a slower rate, less are paying in
- the baby boomer generation reaching retirement age
- life expectancy increasing
- also, the inequality in earnings of the working population
Today payroll tax only covers 83% of all wages.
Do you think your member of Congress wants to come back to their constituents with the news that Social Security benefits will be slashed? I’d bet against it! More than likely we will be looking at reform in the near future.
What might that reform look like:
- higher retirement age?
- lowering cost-of-living adjustments?
- Higher payroll taxes?
If you’d like to see if you can solve the problem, try the online Social Security Game at https://www.actuary.org/content/try-your-hand-social-security-reform
Rep. John B. Larson (D-Conn.), Chairman of the Ways and Means Social Security Subcommittee, is sponsoring a reform bill. He already has 211 co-sponsors, and maybe more at this juncture. It will come to a vote near the end of the year. The bill will place the program in balance until 2094. By federal law, programs are required to project their finances over a 75 year period. His bill offers a 2% increase to all enrolled which would amount to $30 a month, a higher annual cost-of-living adjustment plan, and better benefits for lower-income retirees. Seniors with higher earnings will benefit by a reduction in benefits taxation. To fund his plan, he proposes to increase payroll taxes on incomes over $400,000. At today’s rate, taxes are collected only up to $132,900 in annual wages.
This won’t happen now with the way things stand. But, hopefully, a reform will occur.
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