(Stephen Savage / The New York Times)

(Stephen Savage / The New York Times)

Editorial: Social Security’s good news? Bad news delayed a bit

Congress has a little additional time to make sure Social Security is solvent. It shouldn’t waste it.

By The Herald Editorial Board

The trustees for Social Security and Medicare offered a bit of good news this week in their report on the financial health of the two programs.

That good news? The bad news was pushed into the future; a bit.

A stronger-than-expected economy and healthy labor market brought in additional revenue to the programs, meaning that the point at which both programs would no longer be able to pay full benefits — monthly Social Security deposits and hospital payments — was extended out further than last year’s report; one year for Social Security to 2035 and five years to 2036 for Medicare.

Here’s the problem: Payroll deductions into Social Security brought in $1.351 trillion in 2023, but the program paid out $1.392 trillion in benefits, requiring the government to tap into Social Security’s trust fund to make up about a $41 billion shortfall. With some 11,000 baby boomers turning 65 each day between now and 2027, according to the Retirement Income Institute at the Alliance for Lifetime Income, that means an additional 4.1 million potential new beneficiaries each year will be drawing more from the program than younger workers are adding in.

Once that trust fund is tapped out — and more is being paid in benefits than collected in workers’ deductions — Social Security will only be able to pay out 83 percent of each beneficiary’s promised monthly benefit, a 17 percent cut each month. And that’s if two trust funds — the Old-Age Survivors Trust Fund and the Disability Insurance Trust Fund are included in the same pool.

The prospects are worse if you isolate the Old-Age Survivors fund, which, the trustees estimated, would be tapped out as early as 2033 and would only pay 79 percent of benefits after that.

The good news suddenly doesn’t sound so rosy.

And, even as the deadline gets pushed back — take your pick, nine years or 11 — federal lawmakers have a relatively limited opportunity to get something done. And every year of delay limits the effectiveness of solutions and their ability to make up for lost time.

What’s required is basic math; put more into Social Security and Medicare, make cuts and other adjustments to both programs or choose some from both approaches.

It’s not as if Congress and presidential administrations haven’t considered solutions in years past.

Social Security was last reformed about 40 years ago when the retirement age to receive full benefits was raised to 67 from 65 for those born after 1960.

Generally, Democrats — keen to protect the entitlements of both programs — have backed tax increases, and at the same time have even suggested increases in benefits. Republicans — wary of tax increases — have instead suggested stepped increases in the retirement age or allowing workers to opt out of Social Security and use what would have been deducted from their paychecks for their own retirement accounts.

Among the most commonsense solutions would be adjusting or eliminating Social Security’s income cap on Social Security taxes. Currently, workers and their employers each pay a 6.2 percent payroll tax for Social Security and 1.45 percent tax for Medicare, but the Social Security tax is capped at $168,000 in annual income. Make more than that and you don’t pay tax on income above that maximum. (There’s no income cap on Medicare’s payroll deduction.)

In recent years, specific proposals in Congress would have kept the cap at its current level but resumed the payroll tax for those making more than $400,000; or would have raised the cap to $250,000 and additionally levied a 12.4 percent tax on investment and business income, which would have extended the program’s solvency for the next 70 years.

As is typical, especially in an election year, there’s little political will to act on any fix.

President Biden in his last two State of the Union addresses has opposed any cuts to Social Security but has proposed tax increases for those making more than $400,000 a year to bolster the trust funds. Former President Trump, in March said he was open to cuts — “there’s a lot you can do there in terms of entitlements, in terms of cuts,” he told CNBC — but then later walked back those comments.

There’s even less appetite in Congress to address solutions, at least this year.

Potentially there could be more opportunity next year, depending on the outcome of the elections for president and Congress. Congress will again have to tackle the debt ceiling before Jan. 1. And tax cuts passed during the Trump administration are set to expire by the end of 2025. Both will force additional deadlines — and crises — but could prompt some bipartisan bargaining. Or not.

Which increases the importance for individuals’ own efforts for retirement savings.

Michelle Singletary, the Washington Post’s personal finance columnist, has two recommendations:

Obtain your personal Social Security statement online at ssa.gov, to give yourself a better idea of what you can expect in payments upon retirement; assuming Congress keeps the trust funds solvent; and

Budget additional income for savings, IRAs or 401(k) accounts.

Recent legislation in Washington state can help with the second suggestion.

State lawmakers this spring established the Washington Saves program, which requires employers who don’t already offer enrollment in individual retirement accounts, 401(k)s or pensions to allow workers to be automatically enrolled in a privately managed IRA, leaving workers the ability to opt out of the payroll deduction-and-investment program if they wish. Washington Saves is expected to be available as of July 1, 2027.

No one, however — member of Congress or taxpayer — should find any comfort in a 10-year deadline, even one given another year of grace.

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