If you’re planning to retire in the next 15 to 20 years — or expect you’ll be around to collect Social Security as of 2034 — you have two choices: Either call your member of Congress or start socking away more savings.
Because, unless reforms are made to Social Security, an estimated 86 million Americans who will collect the entitlement 16 years from now could see about a 23 percent cut in their monthly benefits.
The recently released annual report by the Social Security Trustees warns that for the first time since 1982, Social Security will need to dip into its reserve funds to help pay the current 61.5 million beneficiaries. And without changes to the program, those reserves — one for retirees and survivors and the other for disability insurance and — will be depleted by 2034, forcing cuts to all beneficiaries.
Social Security isn’t going bankrupt. The contributions that workers make each paycheck provided a surplus to the trust funds of $44.1 billion in 2017 and it now holds about $2.9 trillion in reserve. But we’re now drawing down those funds, and the trustees project the retiree fund will be exhausted by 2032 and the disability reserve in 2034.
That deadline gets closer with each passing year, and it’s accelerating. As of 2010, the trustees were forecasting the funds’ depletion in 2037, according to the Committee for a Responsible Federal Budget, a nonpartisan advocacy and policy group.
Why? The big bubble of baby boomers began entering retirement a few years ago and will continue to do so for the next 15 years or so. But Americans, also, are living longer and drawing on their benefits longer.
Another contributing factor, according to the trustees, — and another reason to fix immigration, too — is President Trump’s decision to end Deferred Action for Childhood Arrivals, which protects those children from deportation who came to America with their undocumented parents and allows them to work and pay into Social Security.
Fortunately, there are a number of proposals that — if enough are taken together — can again make Social Security more than self-supporting and allow it to again add to its reserves. But it will take some political will and soon.
Waiting 16 years to make reforms, the Committee for a Responsible Federal Budget warns, would mean that any increases to payroll taxes or cuts to benefits would have to be 35 percent to 40 percent larger, and waiting would also place an unfair burden on younger and future generations.
The think tank has an interactive tool online — called The Reformer — that allows people to test out a range of proposals in combination with each other and keeps a tally of their effectiveness, including increases in retirement age, slowing benefit growth for top earners, lifting or eliminating the current $127,000 cap on annual taxable wages, investing trust fund money in the stock market, changing the formula for cost-of-living adjustments and other options.
The proposals aren’t all “takeaways.” Choosing to index cost-of-living increases to the CPI-E, for example, assumes an inflation rate that makes allowances for seniors’ higher costs for health care and other expenses. But that additional cost to Social Security would have to be offset by another fix elsewhere.
Many of these proposals already have been made in Congress, such as the Social Security 2100 Act introduced last year, which would have kept the current cap, but then lifts it for incomes over $400,000 a year.
With congressional candidates beginning their campaigns soon for midterm elections, including Washington state’s Aug. 7 primary, incumbents and challengers should be quizzed by voters on where reforms for Social Security fit among their priorities and what solutions they will support.