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Recently I wrote that the potential for long term care (LTC) expenses was my main financial concern. There’s another concern in hot pursuit.
Not many years ago, I was certain that funding to maintain current Social Security (SS) benefits would be secured. After all, no politician concerned with their job security would let the trust fund run dry. Right? I don’t know about you, but I’m losing hope. There are bills in each chamber regarding SS, however, I’m not hearing about any action.
I think that if SS plays a significant role in your budget, it would be wise to plan for a 30% reduction in 2032, the year that insolvency is being predicted.
Democrats and Republicans each have their own proposals on SS, a simple call to action from you and I is non-partisan. My New Year’s resolution is to write to my congressman and senator monthly until we see some action on this issue. Unlike voting, you can send as many letters as you like.
I still believe in Churchill, “You can always count on Americans to do the right thing – after they’ve tried everything else.” We are just in an “everything else” phase … I hope!
Hmn, Winston may have a point….
By the way, the two positions of public trustee for Social Security have been left vacant since 2016. The Social Security Act requires two
So the statute explicitly requires two public trustees.
I guess I’m not that surprised. Who would want that job?
This is what the latest SS Trustee report says. It has said virtually the same thing for over a decade. And yet…
”The Trustees recommend that lawmakers address the projected trust fund shortfalls in a timely way in order to phase in necessary changes gradually and give workers and beneficiaries time to adjust. Implementing changes sooner rather than later would allow more generations to share in the needed
revenue increases or reductions in scheduled benefits.
Social Security will play a critical role in the lives of 70 million beneficiaries and 185 million covered workers and their families during 2025.
With informed discussion, creative thinking, and timely legislative action, Social Security can continue to protect future generations.”
There is no excuse for this inaction. The longer the delay the greater portion of the burden will fall on younger Americans.
No sane poltician will step into this. Those on SS benefits demand that their benefits and COLAs be protected. They’ll vote against ANY change that reduces benefits. The young see it as an unfair tax benefitting those currently collecting and take a dim view of further SS tax increases. Employers and the self-employed don’t want to see a tax increase, either.NO ONE wants to pay.
Paraphrasing a quote I read on a similar issue: Our politicians know what needs to be done, they just don’t know how to do it and get reelected.
Even if we weren’t running an unsustainable debt and deficit, fixing this will require pain (benefit cuts and or tax increases) that most of the voting public is unwilling to accept at the moment. This makes it politically a very hard problem.
I see alot of comments blaming our politicians – but the fact is some have tried to take this on and been burned for it – in the end our politicians’ inaction on this reflects the publics unwillingness to address it.
I agree with others who state it will only be addressed when the crisis comes. Only imminent pain will focus the attention of the pubic and thus the politicians.
That’s the job of the politicians to make hard decisions in the best interest of all citizens. We need leaders who stand up, tell the truth and explain a situation for people to understand,
Indeed. We’ve met the enemy, and we are him.
According to the TSCL analysis “Loss of Buying Power 2024” at the link below, in 2024:
“… average Social Security payments [were] worth only about 80 cents on the dollar compared to 2010. In other words, Social Security recipients have lost about 20 percent of their buying power.”
The authors of the report and others have suggested that this is because COLA is currently calculated using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), a metric that is thought to be a mismatch vs. typical expenditures by older adults.
For those planning ahead, the projected 30% haircut in social security payments if Congress does nothing, mentioned in the original post above, would thus be even worse in terms of a loss in purchasing power because of the continued use of CPI-W in calculating COLA.
That being said, Congress will likely procrastinate until waiting is no longer a viable option and then do something.
https://seniorsleague.org/assets/TSCL-LOBP-Report-2024.pdf
From a study by the University of Massachusetts Center for Social and Demographic Research on Aging:
“… the Social Security COLA most typically results in a modest increase in benefits, leaving beneficiaries less covered over time, especially in states
where increases in the COLA fail to catch up with sizable increases in the cost of living.”
https://scholarworks.umb.edu/demographyofaging/59/
The senior citizen league is out of touch with reality. They push for more with no regard to paying for what they seek.
Yea so the word is out. Rather than actually fix the problem our elected representatives choose to ignore it as usual and simply reduce our income. Why am I not surprised. Fixing the problem isn’t that difficult. Our elected representatives, you know the ones we can’t seem to get rid off; they’re the problem. Sad. Our solution is to increase our monthly draw from our nest egg to make up any shortfall. Thanks for the article.
“Rather than actually fix the problem our elected representatives choose to ignore it as usual and simply reduce our income.”
Ironically they will trumpet that they didn’t increase taxes yet a thirty percent cut in benefits is worse than a small increase in taxes to a large population/businesses.
I expect them to keep kicking the can until they are forced to act and then will declare themselves the saviors of Social Security. They will forget to admit that earlier action would have resulted in less damage.
Regan, I still believe it most likely will be fixed…. but just in case, plan for the worst case scenario.
I’m with you Dan. Hoping and praying. 😎
Dan: I hope your optimism is well-founded, but like you, I am hoping for the problem to be resolved while planning for the reduced benefits to occur.
Our Congress is excellent at Kicking the Can down the road. Congress rarely, if ever acts ahead of a crisis, my take. And so that will be the way our world on SS. So expect some glorious results in 2032 to save SS. My real worry is the high DEBT, a mere $38.4 Trillion. This bubble will also burst someday, and my concern is for my Grandchildren.
My concern is it will happen in our lifetime
I am hopeful about a last minute fix for SS, but still feel that planning for a cut is prudent.
$38.4 trillion debt and growing is a terrible thing to stick the grand-kids with. I would add environmental concerns to that list as well.
Donald Trump is not a fan of SS, but I beleive he will keep his promise to “not touch SS.” Not saving SS and allowing it to rot can happen at the same time.
If SS benefits are cut and you chose additional withdrawals from your IRA, you may face IRMAA, or a higher tier of IRMAA. Tax laws have a special rath for those that have succeeded and followed the rules.
I’m 45. My wife and I don’t plan on receiving SS. If we do, great!
Fortunately, I’ve always had this attitude. Since I was a teenager and found out what “social security” (an Orwellian name, in my opinion) was, I quickly figured out that it was going to run out around the time I might be able to claim. Didn’t seem fair to me, but I decided to make other plans.
People tend to procrastinate, and government is made up of people. As Don pointed out with the 1983 reforms, Social Security doesn’t get fixed early—it gets fixed when the deadline forces action. I expect the same pattern this time.
The last time major changes were required to keep Social Security solvent was when the trust fund was estimated to run out by the summer of 1983. A bipartisan commission spent most of 1982 developing reforms that weren’t approved by Congress and signed into law until the spring of 1983. I’ll think they’ll fix it this time, too, but not anytime soon.
Thanks Don. I worry that we do not or will not have the people in Washington who will be willing to timely compromise to reach a good faith solution this time around. My memory and understanding of the 1983 Social Security fix is that Ronald Reagan and Tip O’Neill were personal friends despite being fierce political rivals and they shared life experiences such as WWII and the great depression that helped form their core beliefs which eventually allowed them to reach agreement.
From my days lobbying, a phone call to their office is more effective. You won’t speak to them directly, but they tally each call on a subject.
The chances of action in the next four years are near zero. The strategy is to blame any tax increases or adverse changes on the next group in charge.
There was a very viable bill proposed a couple of years ago, but it was ignored.
Phone calls are the best way to contact your rep. I imagine hand written letters are next, as they have to be read by staff.
Dan wrote: “Unlike voting, you can send as many letters as you like.”
Hey … I live in Chicago. I can vote early and often. 🤪
Not really true, but it is what people expect.
Dan, can I ask, is your US Social Security trust fund actual money that’s been set aside, or is it intergovernmental IOUs between different parts of the administration? Essentially a form of accountancy slight of hand?
It’s intergovernmental. As Dan says the excess revenue to the SS trust was used to invest in interest paying treasury bonds. There has not been any excess for several years. Now the bonds are being redeemed to pay benefits. It’s all accounting, but the law prevents general revenue from being used for SS.
So it’s more of a medium term legislative issue rather than a fundamental funding issue.
Not really. Many Congresses have been ignoring the pleading of SS trustees to do something sooner than later for decades. It’s both funding and political and now we have an administration not keen on any federal social programs.
Trick question. If I don’t get it right, I’ll suffer the wrath of Richard. Excess funds are used to buy Treasury bonds. So the Treasury pays the SS trust fund interest, using funds borrowed from other sources, and so on and so on. But without action, the trust fund won’t have funds to buy bonds from the Treasury…..
Sorry. What was your question again?
As Richard said the trust fund is no longer buying treasury bonds….only cashing them in. In fact, about $80 billion per year is being cashed in now to pay promised benefits. The bad news is that treasury has to sell $80 billion in new bonds to pay off those being cashed in by the trust fund.
You and Dick are correct, SS is burning through bonds. I stand corrected.