While the system is currently in good shape at the moment — the trustees expect reserves to continue to increase through the rest of the decade — they project Social Security will begin drawing down those reserves in 2021 and deplete them by 2033. At that point, anticipated revenue will only be enough to pay 77 percent of promised benefits.
In a “Congress On Your Corner” event in Talladega this week, Rep. Mike Rogers touched on the need to “cut entitlements” during a wide-ranging review of topics Congress is dealing with.
An objection was made to his use of the term “entitlements” for benefits for which recipients paid taxes.
Rogers explained the definition of “entitlement” under the law, saying you’re entitled to it because you paid for it. It’s not an entitlement in the same way as federal programs that don’t require recipients to pay for them.
He also reminded those at the meeting the average life expectancy at the time Social Security began was 63, and people had to reach age 65 before they could begin drawing Social Security. Even then it was only supposed to be a supplement to their income.
Now, with longer life expectancies, more people are drawing on the program and living for more years than before.
Already the age for drawing the maximum benefit has been raised, and some have proposed increasing the retirement age for full benefits to 70.
That would be an effective way of controlling costs, but the question of whether to go further in that direction needs to be asked before it is answered.
Other proposals have been suggested for keeping Social Security solvent. One is decreasing Social Security payments. The trustees say a 16.5 percent cut for all current and future beneficiaries should do it. Another proposal is increasing the payroll tax for the system another 2.66 percent. Most workers split that amount with their employers, who pay half of their FICA tax.
A third proposal is to raise or completely remove the cap on taxes for Social Security. This year, payroll taxes are paid on an individual’s income up to $113,700, an amount that has been increased a number of times in the system’s history. The conservative Heritage Foundation argues against that approach, arguing that removing the cap entirely would still leave Social Security with only 87 cents on the dollar for promised benefits.
Some combination of those proposals needs to take shape to keep the program fully funded, and we certainly hope Congress acts soon to fulfill the promise of the system American workers have come to depend on for their retirement.
Fewer employers are offering pensions, instead putting the responsibility on workers to use 401(k)s and IRAs to plan for their own retirements. But that trend has come at a time when more and more workers are trying to get by in an economy that has stifled wage increases, and the cost of living keeps creeping higher. It’s squeezing the middle class, while the working class and the poor are finding it nearly impossible to save for retirement.
Removing the cap would be a good place to start. There’s no cap on Medicare taxation now, and removing the cap on the Social Security portion of the FICA tax so that high-income earners pay the same total percentage as everyone else for Social Security seems a fair way to begin fixing the program. That, combined with a marginal increase on the basic payroll tax, should be what Social Security needs to keep it solvent. We don’t see cutting retirement benefits as an acceptable option.
At current rates, workers and their employers are paying 15.3 percent of earned income to fund Social Security and Medicare.
For the first time in modern American history, workers have less retirement security than their parents did.
These programs need to be there when people retire. It seems the politics of solving the problem will be more complicated than the actual solution.