Social Security’s trustees reported earlier this year that the program will spend more than it collects in 2018, requiring it to tap into its $2.9 trillion trust fund to cover benefit payments. It’s the first time since 1982 that’s happened — and, as America’s population ages, it will keep happening until the trust fund is depleted in 2034, the trustees estimated.
That doesn’t mean Social Security will completely run out of money — it is funded primarily by a dedicated payroll tax — but it does mean changes are necessary to keep retirees from facing a 23 percent reduction in benefits after 2034.
“There’s a problem, but not a crisis,” Andrew Eschtruth, a researcher at the Center for Retirement Research at Boston College tells The New York Times. “It’s something policymakers have acted on before, and the program has always paid full benefits.”
Oft-discussed possible changes include raising the payroll tax, lifting the cap on earnings subject to that tax ($132,900 as of 2019), raising the eligibility age for collecting benefits or cutting benefits for retirees, or perhaps a subset of high earners. The Times’ Paula Span highlights a number of adjustments that could be made to shore up Social Security’s finances and also update the program for our times:
1. Raise the retirement age. An Urban Institute study published this month looks at the pros and cons of raising the Social Security retirement age. Raising the retirement age would reduce the program’s projected shortfalls, and it “would also encourage many older people to work longer, increasing income tax revenue for federal and state governments,” Urban’s Richard W. Johnson writes. But such a change would also create hardships for retirees, especially those with health problems that limit their ability to work, meaning that additional changes to protect those people would be necessary. Even then, the report says, but it “seems unlikely” that those additional policy steps “could fully protect all vulnerable older adults.”
2. Expand benefits. Sen. Bob Casey (D-PA) “has introduced legislation intended to help widows, widowers and divorced spouses qualify for higher payments and receive benefits earlier if they’re disabled,” Span says.
3. Help women catch up. Another idea is to award Social Security work credit to people who leave the labor force to be caregivers at home. “Legislation introduced by Senator Chris Murphy, Democrat of Connecticut, last year would incorporate caregiving when calculating a person’s future Social Security benefits. To qualify, a person would have had to provide 80 hours of care a month to a ‘parent, spouse, domestic partner, sibling, child, aunt or uncle’ who needed assistance with daily activities. The caregiver would be credited with a modest wage for up to five years.”