With news headlines expounding on the doom of Social Security and Medicare, many people believe that Social Security will not be there when they retire. This is not true. Yes, Social Security has some financial challenges, as seen in the recent annual report from the Social Security Board of Trustees, but when the headlines say “Trust fund to run dry in 2035”, or “Social Security Trust fund set to go bust” what does that really mean? Many people believe this means that, if Congress takes no action (which is highly unlikely), all benefits will stop and go to $0 as of 2035. Again, this isn’t true. While current projections show the trust fund will be depleted by 2035 (which is one year later than last year’s report predicted), all beneficiaries would still receive 80% of their scheduled benefits paid for by incoming taxes, according to the trustee report released on April 22, 2019.
Another way to read the report, which doesn’t make the numbers appears so dire, is to see that for the next 16 years Social Security is 100% funded, 93% funded for the next 25 years, 87% funded for the next 50 years and 84% funded for the next 3/4 of a century. Indeed, the report also shows that Social Security has an accumulated surplus of about $2.9 trillion, and that by the end of the century, it will only cost 6.07% of the GDP. This is a far smaller fraction of the GDP than many other industrialized nations, such as Germany and France, pay for their retirement, survivors and disability benefits programs.
So with the myth of Social Security being extinct by 2035 cleared up, the trustee’s report does show us that action is needed to correct this deficit and strengthen Social Security. This program is too important, as it not only provides economic security for our country’s retirees, widows, children whose parents have died and people living with disabilities, it also provides the promise to age and live in dignity to all of us and our children as we get older.
Some options to fix the impending deficit are: Congress could wait and then pass a law to keep benefits at the same level, which would increase the country’s deficit; Congress could raise the age that Americans get benefits; or Congress could increase payroll taxes. Earlier this year, Representative John Larsen (D-CT) introduced the Social Security 2100 Act (H.R. 860) with 200 original co-sponsors, which would strengthen and enhance Social Security. It would slightly increase benefits and substantially increase income. For a short summary and some details, see the articles, A Huge Step Forward in the Quest to Expand Social Security and This New Social Security Bill Could Make Social Security Even Better.