Social Security Trustees Report Little Change – Reform Needed

Category: Financial and taxes in retirement

July 28, 2015 — If you were hoping for great news in the annual report from the Social Security Trustees, you will be disappointed – the program’s trust funds will still be exhausted in less than 20 years. However if you were looking for a doomsday report, you won’t find that either. Even when the Social Security trust funds are exhausted at the current projection date of 2034, current revenues will still be able to fund about 75% of promised benefits. But to avoid significant cuts to benefits, the program needs to be reformed sooner rather than later.

Here are some other facts from the Trustees Full Report:

– The 75-year deficit declined modestly from 2.88 percent to 2.68 percent of payroll – that is a slight improvement. Put another way, if total SS contributions (employee and employer combined) were increased 2.68%, the trust funds would not run out of money in 75 years under current assumptions.

– The deficit as a percent of GDP remains at about 1 percent.

– Trust funds will be exhausted one year later, from 2033 to 2034.

– The exhaustion of the trust fund does not mean that Social Security is “bankrupt.” Payroll taxes will still cover about three quarters of promised benefits after 2034.

– The disability insurance program’s trust fund is expected to be exhausted next year, and it needs immediate attention.

The report goes on to say that the problem is manageable, if action is taken. After the last time reforms were made to the program (1983) the corrections resulted in several years of surplus.

Comments: Do you think your elected representatives have the courage to tackle Social Security reform? We don’t think ours do. What do you think should be done to protect future beneficiaries and the system? (Please note that political rants will not be published).

Posted by Admin on July 28th, 2015

12 Comments »

  1. This is easily fixable but no politician wants to touch this issue. All that needs to be done is raise the age to start receiving ‘full’ retirement benefits to about 68 (and ‘not full benefit’ to 64 … this is fair because the younger generations are all living longer) and increase the employment tax by about 1% (could be split between employer and employee or all on the employer). So I imagine we’ll do nothing until 2034!

    by High Yield Consultant — July 29, 2015

  2. Besides the fact that this is true to the degree that we trust the source, it’s not as though our government didn’t know this was going to happen. That’s why we have a census. Part of the reasoning as I understand it is so we (our elected officials) can plan “appropriately” for the future.
    Maybe they missed something from all the data collected, the articles published, newspaper and social media accounts, etc. So, as part of the Health and Human Services, my guess would be there should be a workable plan, put into affect using the professionals in our government who are paid to do this. Stop threatening via media accounts, all the seniors who depend on this program and those who will reach retirement age soon, and start taking action and do something positive and constructive for all of us. Its workable. Lets do it.

    by Sara Vander Fliet — July 29, 2015

  3. To High Yield Consultant: This would work fine, so long as legislation could be enacted that prevented politicians from tapping into the till. Unfortunately, a pool of money sitting there for future use is just too tempting for our lawmakers. They just can’t leave it alone. Had they done so in the past, there would be no need for reform, and the benefits promised some 30-40 years ago when today’s workers began their careers would remain intact.

    BTW — Eliminating the ‘free rides’ would help too. I’ve worked hard all of my life, contributing into the system since I was age 14. This money belongs to those of us who contributed, not to those who recently entered the country without paying their dues. While I understand they might not have money to buy into the system, that’s really not my problem. I equate this to placing money into a savings or investment account. They have no right to touch my savings, and shouldn’t have a right to receive Soc. Sec. benefits.

    Editor’s Note: In our attempt to be fact-based here, a few clarifications about this comment and the one from freshstart. SS payments are based on your earning history, so there really aren’t any free rides. Some people get upset at non-working spouses getting benefits, but that feature is an important part of the safety net SS was designed to be. As to the comment that this is “These aren’t “benefits”, I paid for them”, that really isn’t the case. SS is a contract between the generations. We baby boomers paid the benefits for our parents, now the next generation will pay ours. Or at least we hope they will be able to!

    by Daniel P O'Neil — July 29, 2015

  4. I’m on disability. My payments are a little less than $20,000 per year. There is NO WAY I CAN SURVIVE on 75% of payments, much less no payments. These aren’t “benefits”, I paid for them!

    by freshstart222 — July 29, 2015

  5. Easy fix. Take the disability part out. That should never have been part of Social Security. Raise the payroll tax a tad. Raise the amount of wages subject to Social Security tax quite a bit.

    by Linda — July 29, 2015

  6. I don’t agree with raising the age requirements for SS. Many jobs are very physical and hard on an aging body. I say work on the economy and get more employees/employers putting into the system. Then do reform to remove fraud, payment to illegals with 5 kids, fake and stolen SS numbers, dead retirees still collecting, especially those out of the country by improving the data technology being used. And the # 1 thing to do is stop taking money out for wars and pet projects. # 2 is pay back all the IOUs by the government.
    Seniors are the # 1 priority cuz they are the ones who contributed their hard earned money and deserve a retirement with dignity. The younger generation need to get smarter about money and saving to supplement their retirement.

    by Nancy poniewaz — July 29, 2015

  7. 1) Raise the “taxable maximum” to $500,000. 2) Ensure the politicians don’t write off the trillions in IOUs. Republicans have been testing this idea on and off for about 5 years.

    by Ed T. — July 29, 2015

  8. As long as the funds are pilfered for pet projects, and there is no principal to earn interest, dividends, etc., ss will be in trouble. How would our retirements look if ALL of our money had gone to finance our kids’s lives (just one example, of course), with not one cent earning interest, dividends, or growth of any kind? That’s what been done with ss money. It can’t be fixed quickly! It took most of us years to earn what we are planning to live on for the rest of our lives.

    The other fixes may have merit, but as long as the funds are removed with no accrual on the principal, they are just a band aid on a gaping wound.

    by ella — July 30, 2015

  9. easiest way to try to fix is to invest say 10% of the funds collected in the same type of mutual funds that Congress uses to invest their retirement savings. The stock market is the best investment long range and it makes no sense to not use it as an investment in the form of safe mutual funds Congress uses and that have performed well. This should only be done after the FED changes their policies to bring interest rates back up because that will have a negative affect on the market.
    I’m sure this would be controversial but other than unfairly increase the salary taxed while not increasing the benefit received there aren’t a lot of options.You will get to a point where the younger generations will demand their own accounts to invest in place of Social Security.

    by john schmidt — July 30, 2015

  10. I suspect one of the “free rides” Daniel is talking about it Social Security Disability which uses the SS fund as the source. Perhaps leaving SS fund to be used only for what it was intended, and financing these other side benefits out of the general budget would have been better. But to politicians it is free money.

    Editor’s clarification: It is true that, unlike with SS retirement benefits, one can qualify for SS Disability insurance without having paid into the system. However as you can see in the Trustees report (see link above) there are 2 separate funds that cannot be mingled – one for Disability and one for retirement payments. It is the Disability fund that will run out of money. next year.

    by john schmidt — July 30, 2015

  11. I don’t think the politicians we have will do anything about it other than try to eliminate it. The recent Congresses that we have had have been lousy! This one is no better. They are bickering over party lines instead of what’s right for America.

    The best thing to do is eliminate the salary you don’t have to pay into SS. This would greatly increase the amount of money in it. At the same time lower the percentage that goes in.

    I don’t agree with raising the age. There are many physical jobs out there that wear on a persons body and they can’t do anymore as they age. They are a greater risk to getting injured and employers don’t want to hire them (I know there are laws but it happens a lot ).

    by Mike Milosovic — August 27, 2015

  12. Clarification on my previous statement

    “At the same time lower the percentage that goes in” – you can lower the payroll percentage that is deducted for everyone since the increased revenue wouldn’t require as high of a payroll deduction. Puts more money in peoples pockets across the board.

    by Mike Milosovic — August 27, 2015

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