Social Security: Will It Survive, Part 1
Last week was designated as “National my Social Security Week” by the Social Security Administration in an effort to encourage people to register with Socialsecurity.gov for online access. In case you haven’t already done so, it’s a good idea.
Appropriately, the Social Security Board of Trustees released their 2015 report to Congress on the financial health, or rather the lack thereof, of the entire Social Security program. The report is 266 pages long, so I suspect it isn’t exactly something you want to read during your lunch break. Amazingly, they’ve been doing this every year for the last 75 years.
As you probably have heard, the Social Security Disability Trust Fund is scheduled to run out of money in the fourth quarter of 2016. At which time disability benefits will have to be cut to 81 cents on the dollar, if expenses are not to exceed the payroll tax revenue allocated to the program.
The combined Old Age and Survivors and Disability Fund is projected to last awhile longer. That fund is depleted in 2034, one year later than the 2014 report expected. At that time, the Trustees project that the payroll tax will be enough to meet 79 percent of benefits.
They also offered up some ways to correct this unhealthy situation. Congress could raise the payroll tax immediately by 2.62 percentage points to 15.02 percent. Right now, the payroll tax is 12.4 percent, divided equally between employers and employees. So, for every $1,000 of income, our combined employer and employee tax would increase from $12.40 to $15.02.
Another way is to reduce benefits on both current and future beneficiaries immediately by 16.4 percent. Or, if they don’t want to disturb those already receiving benefits, Congress could slash benefits by 19.6 percent on beneficiaries starting in 2015 or later. In other words, someone expecting to receive $1,000 monthly would only receive $804.
The big problem with all this, as you probably gathered, is the word immediately.
Congress fixing this problem immediately is as likely to happen as my children are to choose vegetables over ice cream.
The longer we wait to tackle Social Security, the harder it’s going to be.
It may surprise you, but there is a glimmer of hope. Next post, I’ll tell you why.