The Way I See It
Social Security is set to dry up in twenty years. Are you ready?
Most Americans know that Social Security – the rights to income that they earned through working – is the only form of wealth (and sustenance) that many people have when they retire. And in even knowing this, many of us still don't comprehend how important it is – no matter what age you are.
Well, now is that time for each of you – no matter what age, party affiliation, nationality, or income bracket – to recognize this. Social Security changes are on the horizon because the trust funds that support this "too big to fail" program are projected to start drying up in 2033.
Social Security would then only collect enough taxes to pay about three-fourths of benefits. In other words, in twenty years, benefits will be cut by 25 percent.
So, why is this happening?
The easy answer: We are living much longer than anyone in government ever planned for. When the law was enacted in 1935 under President Franklin D. Roosevelt, the average citizen spent about 14 years in retirement. Because of all the advances in medicine over the years, today's worker is expected to live over 18 years in retirement. That 30 percent increase in life expectancy can explain most of the shortfall projected in the near future.
However, there are a couple of options that could bring a resolution to the table:
Back in black
The first option – and probably the easiest but not the most popular, especially with those closer to retirement – is to delay benefits to contributors until later in their lives. As unpopular as this may be, this has been done before. In 1982, under President Ronald Reagan, Congress enacted a sliding scale of when a worker would receive benefits based on their date of birth. As it currently stands, Social Security is based on a sliding scale depending on your income, how long you work, and at what age you retire. A current example of this is if you were born after 1960, you would have to wait until you were 67. This option would raise the age requirement again – but, it would also quickly take us out of the red.
A matter of semantics
A second option – and a more complicated way to fix the system – deals with how much each worker is actually paid each month. As it stands today, an average retiree receives $1,230 per month in benefits. This amount is adjusted every year to keep pace with inflation as measured by the Consumer Price Index. The solution is to change the way the yearly increase is calculated, which would ultimately lead to a slight decrease in benefits each year with no guarantee on when this would end.
The rich get richer
A third option in reform would be to raise the tax cap on an individual's income. Currently, the cap on income subject to taxes is $113,700. This means that those earning more do not pay Social Security taxes on wages above that threshold. Simply raising this cap would mean an increase in taxes, but all of that money would go directly into the social security trust fund.
All things told, the current system would most likely fail if no changes are made. Like many political decisions we are often presented with, not one of these solutions is overwhelmingly popular; if one was, I wouldn't even be telling you how I see it.
Our government officials are not sent to Washington to act in their own self-interest, only passing laws that are popular with their voting constituents; they are also expected to stand up for what is best for our country.
The way I see it: The wealth and sustenance for all Americans is a lot thinner than we like to think – and allowing it to crash and burn because a few simple compromises fail to take place would not only add insult to injury, it would be a true disaster.
Love? Hate? Agree? Disagree? I want to hear from you. Email be at rStyn@ErieReader.com, and follow me on Twitter @rStyn.