SS Could Be Insolvent in 8 Years

[timbervest]

Here's a fifth - Gradually eliminate the spousal benefit. People should only collect SS based on their own income history. It is patently unfair that a non-working spouse can collect more of a spousal benefit because they married "rich" than someone who worked all of their lives but never made much. We've come a long way from the time when most women didn't work.

Although many more spouses (mostly women) are in the workforce than in previous years, a significant number still stay at home and raise children so do not have the opportunity to work at a job and accumulate a benefit on their own. Are you suggesting that all families should have two working parents and put children in daycare or if you choose to have your spouse stay at home to provide a family setting for childbearing and rearing you are just out of luck if the primary breadwinner dies?

 

[piccolopat]

Although many more spouses (mostly women) are in the workforce than in previous years, a significant number still stay at home and raise children so do not have the opportunity to work at a job and accumulate a benefit on their own. Are you suggesting that all families should have two working parents and put children in daycare or if you choose to have your spouse stay at home to provide a family setting for childbearing and rearing you are just out of luck if the primary breadwinner dies?

It's always a choice for one parent to stay home. Even then, there are still plenty of years before and after child rearing to earn a benefit for yourself.
Perhaps SS needs to create a system where a non-working person can pay into the system the same as if they were working a minimum wage job for the required number of quarters so they can get the minimum benefit later in life. Then at least they are paying into the system before they get anything out of it. This is a pet peeve of mine because I have family members that had little or no work history who will get a bigger benefit as a spouse than another who worked all her life but remained single.

 

[Koolau]

The government will print more money. Problem solved.

Heh, heh, more like "problem kicked down the road" like the proverbial can. YMMV

 

[daylatedollarshort]

No way would a politician cut SS. They may increase the retirement ages, tax it at 100%, but they won’t cut it.
I expect the solution will be to add SS tax to non W2 income. After all, that will only affect the rich.

If your benefits get cut $3K a year and the savings to go back to the SS trust fund, or you pay an extra $3K in taxes on your SS earnings and the tax money goes back to the SS trust fund, your benefits are effectively cut the same either way. Of course Congress won't call it a cut and won't make it obvious. That is why the method on how SS benefits are taxed is so convoluted. Another smoke and mirrors term for benefit cuts is "chained CPI", meaning inflation adjustments will be reduced.

 

[timbervest]

It's always a choice for one parent to stay home. Even then, there are still plenty of years before and after child rearing to earn a benefit for yourself.
Perhaps SS needs to create a system where a non-working person can pay into the system the same as if they were working a minimum wage job for the required number of quarters so they can get the minimum benefit later in life. Then at least they are paying into the system before they get anything out of it. This is a pet peeve of mine because I have family members that had little or no work history who will get a bigger benefit as a spouse than another who worked all her life but remained single.

Reasonable suggestion. Everything has to change eventually.

 

[Koolau]

If your benefits get cut $3K a year and the savings to go back to the SS trusts fund, or you pay an extra $3K in taxes on your SS earnings and the tax money goes back to the SS trust fund, your benefits are effectively cut the same either way. Of course Congress won't call it a cut and won't make it obvious. That is why the method on how SS benefits are taxed is so convoluted. Another smoke and mirrors term for benefit cuts is "chained CPI", meaning inflation adjustments will be reduced.

Yes, we've seen this movie before.

 

[MRG]

Yes, we've seen this movie before.

https://youtu.be/5xHlL2pOgL4

Thanks for the memories. Somebody wrote a song about it.

 

[pb4uski]

It's always a choice for one parent to stay home. Even then, there are still plenty of years before and after child rearing to earn a benefit for yourself.
Perhaps SS needs to create a system where a non-working person can pay into the system the same as if they were working a minimum wage job for the required number of quarters so they can get the minimum benefit later in life. Then at least they are paying into the system before they get anything out of it. This is a pet peeve of mine because I have family members that had little or no work history who will get a bigger benefit as a spouse than another who worked all her life but remained single.

One thing to consider is that in many cases those spouses were able to stay at home because the working spouse had a higher income so the couple could afford to have one spouse stay at home for child rearing. But the working spouse gets less benefits in relation to what they paid in because of the way the bend points work so these spousal auxiliary benefits partially offset that.

A large percentage of married women are eligible for benefits based on their own work record... 79% for war babies, 87% for leading boomers and 92% for trailing boomers and GenXers, so societal changes are continually reducing the overall cost of auxiliary benefits so the benefit of such a change is diminishing over time.

There is a proposal along those lines but the impact is negligible. See https://www.ssa.gov/OACT/solvency/provisions/charts/chart_run321.html

 

[bada bing]

Even if there is such a statute (haven't heard of it before), changing it is going to take no more than an hour in DC.

Our Government is insolvent today. Has been for decades. But that has never been a problem. Just to provide some perspective.

One big reason they cannot/will not do this is that SS is not a debt of the federal government. It is a partially unfunded liability. That may seem to be splitting hairs, but it is not. You do not have a legal claim to your SS benefit, the Supreme court has ruled so quite clearly. A political claim - of course. If the shortfall were to be put into the general fund budget, it would increase the official national debt over time by I believe about $13T that SS is currently short. The "fix", whatever it ends up being, will be segregated off in the trust fund and dedicated FICA taxes. No way they will put it on budget. The idea that we can "print" the shortfall with no tax increases and/or benefit cuts is a pipedream.

It's always a choice for one parent to stay home. Even then, there are still plenty of years before and after child rearing to earn a benefit for yourself.
Perhaps SS needs to create a system where a non-working person can pay into the system the same as if they were working a minimum wage job for the required number of quarters so they can get the minimum benefit later in life. Then at least they are paying into the system before they get anything out of it. This is a pet peeve of mine because I have family members that had little or no work history who will get a bigger benefit as a spouse than another who worked all her life but remained single.

The best "fix" for spousal benefits I have seen is to eliminate separate spousal benefits and replace it with a pooled credit for married couples. For each year married, each partner would get credit for half the couple's combined FICA taxes. It would result in an advantage for low-mid earner, one income couples by virtue of the bend points. It would result in high income, one earner couples paying up to 2 wage caps instead of one.

One thing to consider is that in many cases those spouses were able to stay at home because the working spouse had a higher income so the couple could afford to have one spouse stay at home for child rearing. But the working spouse gets less benefits in relation to what they paid in because of the way the bend points work so these spousal auxiliary benefits partially offset that.

How does the bolded part work ? I am unaware of any changes to the bend points or income caps based on marital status.

 

[daylatedollarshort]

The idea that we can "print" the shortfall with no tax increases and/or benefit cuts is a pipedream.

+1. Pipedream is a good word for it. There is no historical or current proposal basis, and there are many proposals out there, that don't simply boil down to increased taxes or benefit cuts. The only issue to be decided is which generations and income brackets get impacted. The idea that SS won't be cut because it would be unpopular with voters is pretty clearly disproved by historical facts.

 

[ncbill]

How does the bolded part work ? I am unaware of any changes to the bend points or income caps based on marital status.

I thought their point was that the spousal benefit (for a couple) helps compensate for the low crediting to future SS retirement once past the second bend point.

 

[indiajust]

I prefer the swiss/singapore/chile/australia change to nationalized retirement.

Their version is broadly like an inheritable IRA, with a touch of welfare for lower income folks, and a cap for the higher income folks. So they get a statement with roughly 60/40 portfolio estimates and invest in their own economy over their work life. Its a forced savings plan that invests for a lifetime. Less old age poverty, more working capital to build wealth and industry and jobs.

FICA is a transfer program, has no savings, and so is perfect for political promises/shenanigans.

After the coming 24% haircut, I am just hoping to pay rent and utilities with it. I don't see any chance of reform with current demographics. Perhaps a project for ascendant millenials once their boomer parents lose power. It's just another program from the WW2 era that needs rebooted into this century.

 

[pb4uski]

I thought their point was that the spousal benefit (for a couple) helps compensate for the low crediting to future SS retirement once past the second bend point.

Yes, that was my point, that higher earners get less in relation to what they pay in and that some spouses with limited earnings record get more than they deserve and that it somewhat evens out.

 

[ponyboy]

The government never runs out of money these days. They just print more.

This. Amazes me that people think money will run out. They can simply print more.

 

[SecondCor521]

Article published on CNN today that is relevant here I think:

"Social Security will have to cut benefits by 2034 if Congress does nothing to address the program's long-term funding shortfall, according to an annual report released Tuesday by the Social Security and Medicare trustees.

That's one year earlier than reported last year. By that time, the combined trust funds for Social Security will be depleted and will be able to pay only 78% in promised benefits to retirees and disabled beneficiaries."

https://www.cnn.com/2021/08/31/politics/social-security-medicare-report/index.html

 

[USGrant1962]

Article published on CNN today that is relevant here I think:

"Social Security will have to cut benefits by 2034 if Congress does nothing to address the program's long-term funding shortfall, according to an annual report released Tuesday by the Social Security and Medicare trustees.

That's one year earlier than reported last year. By that time, the combined trust funds for Social Security will be depleted and will be able to pay only 78% in promised benefits to retirees and disabled beneficiaries."

https://www.cnn.com/2021/08/31/politics/social-security-medicare-report/index.html

That quote refers to the combined old age and disability funds - which are separate under the law. The old age fund is 2033/76% for purposes of FIRECalc, Opensocialsecurity, etc. From the Trustees report summary:

Based on our best estimates, the 2021 reports show:

• The Old-Age and Survivors Insurance (OASI) Trust Fund, which pays retirement and survivors benefits, will be able to pay scheduled benefits on a timely basis until 2033, one year earlier than reported last year. At that time, the fund's reserves will become depleted and continuing tax income will be sufficient to pay 76 percent of scheduled benefits.

https://www.ssa.gov/oact/trsum/

 

[RunningBum]

So the so-called "expert opinion" was way off.

 

[RISP]

Has anyone seen a non-partisan analysis of the global situation, what strategies there are, and what various countries are more or less doing about it? Given that it's global and many places have it worse than we do, surely there has already been a lot of theorizing and policy wrangling.

I can at least offer some perspective from Germany. As you may or may not know, we are one of the countries with a quickly aging population, just behind Japan I believe. Now that boomers are starting to retire, this is putting significant pressure on our version of SS (GRV or "gesetzliche Rentenversicherung"). In addition to that, the system is still suffering from having to integrate the eastern part of Germany after 1990.
The problem of demographic change has been known and discussed since at least the 1980s. Measures taken so far include:
- Gradually increasing the regular retirement age from 65 (still valid for those born before 1947) to 67. There are frequent discussions about further increasing that. The number 70 is often thrown around, while others suggest to increase it by 1 year for every 2 years of increased life expectancy.
- Taxing SS benefits (starting at 50% of SS being taxable income for those retired in 2005 and increasing to 100% by 2040).
- Increasing the contribution percentage (currently 18.6% up until 85.200€).

 

[FANOFJESUS]

But right by whose books?

Raise tax rate - people who pay tax don't like it.

Raise retirement age - people who are relying on SS to retire don't like it.

Raise the cap - I like it because I am not working, but ask those who work. But I think this is the least painful option. However, in the current formula, if you raise the cap, it means that the total cap will have to raise to pay out more to the high income earners who contributed to the system for the full 35 years. Unless there is no change to the total cap, then they don't get more SS back despite paying more into the system.

Reduce COLA - it is already a problem for retirees because COLA is insufficient to cover their health care cost increase.

So, for me, raise the cap should be the way to go. But I am just a little person behind the screen with a keyboard here.

You are right fewer voters on the high side of the cap. They have less say.

 

[karen1972]

I've always used 75% so I'm still ok w/ my calculation, 20 years to go though.

Certainly raising the cap would be reasonable.

I'd also like to see a change to spousal benefits which I think would simplify it and make it more equitable. My thought is if you file a joint return, you record 50% of the total to each spouse, so if one spouse was capped at say $140k and the other made $40k, $180/2, each record $90k in their earnings record for that year.

1. Stay at home person gets credit
2. Limits benefit of marriage to just the timeframe of marriage...eliminates need to be married at least 10 years, skips all the games people play with spousal benefits.
3. Eliminates requirements on spouses age to collect as you have your own record and thus no longer dependent on when spouse (or ex spouse) takes theirs.
4. If still married, the surviving spouse would still be able to receive the pump up in benefit.
5. And you could even offer the option to bump up your own cap to pay in more for your spouse, so if you made $200k, you could pay in and each get credit for $100k (not sure anyone would do that..but maybe especially if you just recently married and the other doesn't have much credit).

 

[Sniggle]

The benefits will never go down....because it would be political suicide.

However, a combination of the next generation having to pay more into the system and some scheme to claw back some benefits from the 'rich' is quite probable.

Maybe the 'Mu' Covid variant will reduce the pressure on the system.

 

[RetiredHappy]

I'd also like to see a change to spousal benefits which I think would simplify it and make it more equitable. My thought is if you file a joint return, you record 50% of the total to each spouse, so if one spouse was capped at say $140k and the other made $40k, $180/2, each record $90k in their earnings record for that year.

1. Stay at home person gets credit
2. Limits benefit of marriage to just the timeframe of marriage...eliminates need to be married at least 10 years, skips all the games people play with spousal benefits.
3. Eliminates requirements on spouses age to collect as you have your own record and thus no longer dependent on when spouse (or ex spouse) takes theirs.
4. If still married, the surviving spouse would still be able to receive the pump up in benefit.
5. And you could even offer the option to bump up your own cap to pay in more for your spouse, so if you made $200k, you could pay in and each get credit for $100k (not sure anyone would do that..but maybe especially if you just recently married and the other doesn't have much credit).

Every point except number (2) costs SS administration to pay out more which will bankrupt the system faster. No dice.

 

[daylatedollarshort]

The benefits will never go down....because it would be political suicide.

Have they ever gone down in the past? Spoiler Alert, they have - https://www.ssa.gov/history/50mm2.html

 

[teejayevans]

Have they ever gone down in the past? Spoiler Alert, they have - https://www.ssa.gov/history/50mm2.html

I agree with him if you caveat it that won’t go down for anyone older than 50.

 

[Chuckanut]

Have they ever gone down in the past? Spoiler Alert, they have - https://www.ssa.gov/history/50mm2.html

Sorry, not going to read multiple screens full of fine print.

I do agree benefits have been reduced. My FRA is over a year more than my father's. That's a reduction in my book. And the amount of SS income that is exempt from taxes is never adjusted for inflation, another de-facto reduction in benefits for all of us.

I am glad I studied my math. It keeps me from being fooled.