The Dollars and Cents of Social Security Insolvency
Numbers don’t lie. Social Security is facing a funding shortfall. If nothing is done, it will be forced to slash benefit payments for as many as 70 million Americans by 2033. If that happens, the average couple will see their annual payments plunge by about $16,500, and a middle-income single worker will see their benefits cut by $8,200 per year — that’s according to a recent analysis from the Committee for a Responsible Federal Budget.
A CBS News report says insolvency is unlikely, but time is running out to fix the situation. The biggest issue is that Social Security is paying out more in benefits than it is taking in from payroll taxes. It’s being forced to tap into its trust fund to fulfill the benefits promised to retirees.
Trust Fund Deficit Consequences
According to the article, “Without changes, the trust fund is slated to be drained by 2033, which would result in an automatic 21 percent cut to beneficiaries’ monthly checks…That could prove devastating to both current and future retirees, with many of the former already financially stretched and given that 4 in 10 seniors live solely on the average Social Security monthly benefit of $1,907.”
Senior advocates caution this could result in a spike in poverty rates for older Americans.
Calling on Congress
Experts seem to agree that the chances of these drastic cuts actually happening are slim. That’s because lawmakers would likely be voted out of office if they allowed that to happen. Social Security is just too important to Americans and millions of seniors rely on it for their retirement income.
The CBS News report points out that “there are a number of proposals floated by lawmakers on how to buttress Social Security, ranging from either boosting taxes to cutting benefits, or a mix of the two ideas.”
A Viable Solution
The Seniors Trust stands behind the Social Security Expansion Act introduced by U.S. Sen. Bernie Sanders (I-Vt.). Not only will this landmark piece of legislation ensure the long-term solvency of Social Security, but it will also provide seniors with bigger benefits.
Under this bill, seniors would receive an extra $2,400 in benefits each year. In addition, it would recalculate the way the Social Security cost-of-living-adjustment (COLA) is calculated, using the Consumer Price Index for the Elderly (CPI-E) instead of the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The CPI-E more accurately reflects the actual spending of seniors, which tends to be on expenses such as healthcare and housing.
To fund the proposed benefits boost and maintain solvency far into the future, the Social Security Expansion Act calls for applying the Social Security payroll tax on all income above $250,000. Currently, earnings above $168,600 aren’t subject to the Social Security tax.
If enacted, the Social Security Expansion Act could keep Social Security solvent for about 75 years.
