November 28, 2017 — As if there wasn’t enough bad news to go around, your Social Security retirement check is in trouble. If Congress doesn’t act soon, retirement benefits will probably have to be cut by 23% in 2034 – when someone who is 66 years old now will be 83. Most everybody knows the two major reasons driving this – too many baby boomers getting benefits compared to the number of younger folks paying into the system, and our ever-increasing life spans. Combine that with the fact that 60% of Americans rely almost entirely on Social Security for their income, and we have a disaster in the works.
Recently we saw a very practical article in MarketWatch by Paul Brandus, “3 things that could help put Social Security back in the black“. His common sense approach so simply gets to the bottom of the issue that we thought we would repeat it:
1. Raise the retirement age. Brandus suggests that we start raising the normal retirement age for full benefits by a month a year. It wouldn’t take too long to raise it to age 68, which would do a lot to help stabilize the fund.
2. Raise payroll taxes. This one might hurt a bit. Currently employees pay 6.2% in FICA – the SS trustees recommend increasing that by another 2.83%. So if you make $50,000, your FICA share would go from $3100 to $4650 – ouch!
3. Raise — or eliminate — the cap on taxable wages. In 2018 if you make more than $128,700 you and your employer would stop paying into Social Security at the point when you earned that much (there is no limit on Medicare). SS misses a lot of potential revenue from CEOs who get those nice $50 million paychecks. The Center for Budget and Policy Priorities, a nonpartisan group, estimates are that from a quarter to as much as 90% of the SS shortfall could be solved with this idea alone.
Seems simple enough, right?
We have to do something, as every month of inaction makes the problem harder to fix. Yet neither party is talking about it. Neither is the guy who signed the rather dire Audit Report, Steve Mnuchin. It is a national embarrassment, in our opinion. Next time you talk with an elected official, ask them what their plan is to save your Social Security.