Retired Americans count on our country’s Social Security program. Statistics show that nearly nine out of ten individuals age 65 and older receive Social Security benefits. For most elderly individuals, those benefits make up about one-third of their retirement income. That is why news reports about Social Security insolvency are so distressing. Headlines warn of the pending depletion of the Social Security trust fund, with predictions that this retirement safety net may dry up in the coming years and not be there for our children and grandchildren.
While Social Security is not currently going bankrupt as some say, the truth is that it is facing a solvency issue. Social Security is funded by taxes paid by current workers, but the ratio of workers to retirees is growing smaller. This is leading to a funding shortfall.
What’s the Problem?
According to the financial services company Ascensus, in 1950 there were 16.5 workers for every retiree receiving benefits, but last year there were only 2.75. There are simply not enough workers today compared to the number of Social Security beneficiaries. This is due in part to more Americans living longer and continuing to receive benefits, coupled with a declining birth rate that has resulted in a smaller workforce.
A Congressional Research Service report from last year found that under the current benefit formulas and with the existing asset reserves, the Social Security trust fund is expected to be able to pay full promised benefits until about 2035. After which, program revenues are projected to only cover about 79% of the promised benefits, and incrementally drop to 73% by 2094.
What’s the Solution?
The Social Security Board of Trustees has offered two hypothetical solutions. One is to increase the payroll tax and the other is to reduce benefits. Obviously, neither option is ideal. No worker wants to pay more in taxes and no retiree wants to see their benefits reduced.
So, what can be done? If passed, the Social Security Expansion Act will help ensure the long-term solvency of the Social Security program by lifting the cap on Social Security taxes. This means the wealthiest Americans will pay a little more in relation to their income. Lifting the payroll tax cap could extend the solvency of Social Security until the year 2071.
The Seniors Trust is committed to urging lawmakers to pass the Social Security Expansion Act. A recent survey showed unanimous support for this effort. A full one hundred percent of the people polled – a truly astonishing result – said Congress should pass the Social Security Expansion Act which expands benefits and protects the financial security of retired Americans.