The Social Security trustees just announced that the primary trust fund used to pay retirement benefits is set to become depleted in 2033. At that point, the only money available to pay promised retirement benefits will come from those currently paying into Social Security out of their monthly paychecks.

And, in 2033, that inflow is estimated to allow payments of only 77% of the promised benefits.

But we CAN fix Social Security. And this report is not a surprise. For many years these Trustee reports have predicted a shortfall that would come in the late 2030s. But suddenly, the shortfall is appearing in 10 years . . . when a lot of us hope to be around collecting! The day of reckoning is suddenly just around the corner.

For years I’ve been preaching that you need to save more for retirement and plan to depend less on Social Security. But that’s easier said than done for many people. Social Security now has 70 million beneficiaries, and according to the Social Security website “half of the population aged 65 or older live in households that receive at least 50 percent of their family income from Social Security benefits and about 25 percent of aged households rely on Social Security benefits for at least 90 percent of their family income.”

Losing nearly one-quarter of the benefits that people earned and expected will have a shocking impact.

So, it’s time for Congress to act on something really important, instead of dancing around the political game of raising the debt ceiling. We know the politicians understand the importance of fixing Social Security, because during the latest State of the Union address, both Republicans and Democrats promised that they would not cut Social Security and Medicare in the current budget.

The real issue is how they will shore up the Trust fund during the next 10 years. To answer that, the Committee for a Responsible Federal Budget (made up of non-political policy experts) offers these suggestions, alone or in combination. (And I promise, depending on your economic and political situation, you will want to scream at some of these!)

1. Move money around. There are additional funds in the Survivors Trust fund and in the Disability trust fund. Moving money from these areas could extend the life of the main trust fund by several years – although the impact on benefits for the disabled could be significant.

2. Adjust COLAs. The high COLA adjustments this year are a significant part of the reason the trust fund depletion date was moved ahead by one year in the latest report. Those high inflation adjustments were not a part of earlier predictions. If inflation isn’t slowed, they’ll impact the solvency of the trust fund even more.

3. Allow more legal immigration to boost the workforce. In the 1960s there were 5 workers for every retiree. Currently there are two workers per retiree – and jobs are going begging. More workers paying in means more money for retirees.

4. Raise the retirement age. The last time that happened was in 1983—but it only impacted workers at the start of their careers, since the increase to age 67 was phased in over a long period. Any increase now would take years to phase in.

5. Increase the amount of wages that is subject to the payroll tax (FICA). In 2023, earnings are only subject to FICA up to $160,200. It’s a level that gets adjusted upward every year, but still allows higher incomes to escape from FICA. If this step is taken now, it could erase between 20 and 40% of the funding gap in 2032.

6. Consider expanding Social Security coverage to all newly-hired state and local government workers, who would then contribute immediately. Down the road, this creates more of a payment problem, though.

7. Replace the current benefit payment schedule, which is dependent on covered earnings, with a flat payment – perhaps $125% of the Federal poverty level in the year of payment.

See, I knew I could make you scream at all these possibilities being floated by sophisticated, non-political policy analysts. And we haven’t even touched on the solvency of Medicare yet. That would require another set of tax increases and/or coverage cuts.
This isn’t going to be easy. And that’s The Savage Truth.