FREE NEWSLETTER
I listened to an interview with a former Social Security deputy commissioner, and one point stuck with me: Social Security isn’t going to vanish, but Congress still needs to deal with its funding problem.
I’m getting close to retirement, so I’d like to know what to plan for. I can run the numbers with a smaller benefit. What I can’t do is guess which changes Congress might make—or whether they’ll wait until the trust fund is nearly depleted before making them.
I know neither party wants to be the one proposing higher taxes or changes to benefits. But the longer they wait, the harder the fix becomes. I’d rather hear the options now and have time to adjust than get a last-minute deal after years of reassuring headlines and political finger-pointing.
What would a fair compromise look like for current retirees, people nearing retirement, and younger workers? Do you think Congress will act before it has to? Does anyone think Congress will act early? Or is this destined to be another deadline-driven deal?
Jeff
Here is the interview if you want to watch. Social Security Will Change—Here’s Who Gets Hit First | Jason Fichtner
Great Questions on SS. I believe SS will continue, but at worst case will pay say 80% of today. What they should do is raise the retirement age to 73 or 75 just like when you have to take an RMD. The other thing I propose is for everyone to pay on their full salary, no stop payments after $184,500. I suggest not raising the percentage. Congress needs to start NOW.
Raising the salary limit does not make SS sustainable, it extend the problem 20-25 years but does not solve it. We need a permanent solution. That simply means adjusting the FICA percentage and the earnings taxed every year to assure the actuarial funding requirements are met. In addition, modify the COLA or eliminate it for those who start SS at FRA with the maximum benefit possible, they should be able to manage inflation in retirement.
Too few officials in Congress are willing to raise the cap on SS taxes. Just raise raise the cap to over $1M or even eliminate it. Less than 20% of people would have to pay more, and it’s the 20% who could most afford to pay more. But Congress won’t do it.
Only 6% of Americans earn over the current cap and it’s been that percentage for decades. I have no problem raising the cap provided SS benefits are also earned based on the additional earnings taxed, even if a new bend point is added at say 10%. But to do otherwise changes the entire concept of Social Security which I believe is risky.
I have no faith in the political system at the moment. The current composition of Congress could decimate Social Security. A decade ago I would have given a different answer. Today, all bets are off. And this includes for continuity of the regulated financial system which this entire website is predicated on. I’m proceeding as though we will have continuity because there are no alternatives.
I wish I was an elected congressman. Thanks to the speaker I’d have so much time off.
It’s a 365 day job in DC and home and the average work week is 50-60 hours. Virtually no time off, just spent many different ways.
And it’s amazing how little gets accomplished.
Right – so many hours spent glad handing and begging for money …
From AI:… the upcoming general election race in North Carolina is projected by media analysts to potentially exceed $600 million in total spending.
Maybe all the money being spent on federal politicians’s electoral dreams would be better spent on feeding and housing their constituents.
Hear, hear. I’ve thought that for years. The current political-ad-spending budgets are 🤯
Members of Congress are like children. Procrastinate until the very last minute to do anything. How many government shutdowns threats have we endured because they are mostly all child-like. Just please remember you are working for your constituents, not yourselves.
Like children? Please don’t malign all children. Plenty of children don’t procrastinate. It’s a lot of people who are like this. It’s not age related.
Good points Ted. The lyrical words of Stephen Sondheim come to mind: “Send in the clowns….don’t bother, they’re here” and have applied for decades.
As Richard Quinn has argued many times, this is fundamentally a political problem, not a funding problem. The issues are well understood, the options are known, and gradual changes could fix them.
The problem is us.
Politicians have learned that frightening voters about what the other side might do to Social Security works better than asking voters to accept reasonable tradeoffs.
Seniors are a formidable voting bloc, yet too much of that power gets diverted by fear and misinformation. Perhaps instead of asking which side will “protect” Social Security, we should demand that Congress come together and actually protect seniors.
I am hopeful change will come sooner than later.
“we should demand…”
I agree but voting, our only lever ?, doesn’t seem to change anything.
New people, same result. 🤷♂️
two prong planning approach…. for tax planning modeling full benefit, for cash flow modeling a 23% reduction in benefits
Tip O’Neill was a leader who knew compromises and tough decisions had to be made back in 1983. I don’t know if there are people like that on either side of the aisle in this poisonous political environment.
George, I agree with you. Tip and Reagan used to fight things out while maintaining respect for each other. George H Bush’s best friend was probably Lud Ashley, the democrat congressman from Toledo.
Sadly, those days seem to be long gone.
Dan, David Stockman was the major player in the negotiations for Reagan. Read his book years ago. Very interesting.
Stockman’s role was discussed in the Reagan biography that I read. His book would likely be a good addition to my reading list.
Kick the can down the road is Congress’s strategy for SS.
If you really want to see how relatively easy it is to fix SS with a combination of changes. Most relatively minor in the scheme of things, go to the Committee for a Responsible Federal Budget modeling tool and build your combination of changes.
The YouTube you linked is really quite good! Thank you.
The night before, obviously. Don’t you know what Congress is like?
Then they’ll congratulate themselves on a great job.
To my mind, Mr. Quinn has been spot on whenever he discusses the Social Security dilemma. Americans on the whole are addicted to the benefits of deficit spending. I’m sure that includes me as well. What I observe is that any time a politician makes any kind of gesture of constructive support for raising SS taxes or raising the retirement age, their political opponent will spin it into a slick attack ad. Voters will nod their heads and punish the offender. No way this gets solved without a crisis. And the “solution”, whatever it is, will leave a lot of people angry. There are no solutions, only tradeoffs, and the electorate is currently incapable of seeing that.
The sad thing is so many voters believe the widely circulated misinformation about SS. It’s been going on for years although more intense now.
My theory is many people first want a scapegoat to blame and second are looking for a solution that only involves the other guy, not them.
Some people believe they paid for their own benefits, others think they could have invested the payroll tax and not only received more in retirement but also cover all the insurance benefits provided SS. Many are convinced some past administration used the trust money and never paid it back. And the latest is there would be plenty of money if ineligible people weren’t getting benefits.
It’s really quite sad because it makes it so much more difficult to make necessary changes.
Jeff, I don’t think it will come to the worst case (the 22% cut), still, that’s what I’d plan for if I were at your stage.
The situation is absolutely maddening for all the reasons listed in the comments below.
Congress isn’t going to act before 2029 (for obvious reasons). To avoid reductions in current benefit payments in 2032 will require a very significant quick injection of added revenue. How who knows. One short term fix may be to transfer funds from the disability portion of the trust to the retirement side which has been done before.
But the real solution must be increased ongoing revenue in excess of immediate payments to replenish the trust reserve again and pay full accrued benefits.
To be fair the money needs to come from current retirees, workers and employers. To me that means modifying future COLAs, increasing the payroll tax on both worker and employer with perhaps an extra 1/2 to 1% on employers. We could also raise the taxable wage cap, but only if there are some additional benefits accrued on the higher earnings taxed. Raising the FICA tax is a form of forced savings in my view.
After all the fixes are done, additional changes should be based on the annual actuarial determination of what is needed to keep the program sustainable. No more Congressional involvement, the program runs on automatic based on changes in demographics and/or future changes in benefits. Never go through this again. What it all costs is real, current and visible.
Private pensions are required to maintain adequate levels of funding, why not Social Security?
I completely agree, Richard! All of us involved — retirees, workers, and those yet to join the workforce — must be involved in the approach to resolving the lack of assets necessary to maintain the benefits which have been promised to retirees!
Social Security may be the only issue that gets older voters to stop automatically voting for incumbents. We don’t usually do politics here, but Social Security is a political problem that needs solving. Someone’s ox is going to get gored, and I hope that our usually feckless politicians spread the pain around, so we all share in the results. Poor people or those who are on the edge usually get screwed. I hope that doesn’t happen with Social Security reform.
The shame is that there is no reason anyone should be gored, gradual modest changes over a decade would have and should have avoided any crisis. Americans don’t want to face the truth and politician fear voters if they tell the truth.
Even now many Americans think the problem is because Congress borrowed trust funds “and didn’t pay it back” or many people are illegally collecting benefits. It’s tough to cope with such ignorance.
If you want detailed discussion about SS and the facts from the Trustees and more, you might want to view the Social Security section of my blog Quinnscommentary.net.
Free Newsletter
Arrives weekly.