Will Social Security Still be There When You Retire?

Social Security is critical to most financial plans – when will the government get around to fixing it?

I hate stepping into political topics, but this is of crucial importance to both young and old. 

Back in the glory days of bipartisan problem solving Tip O’Neill and Ronald Reagan were able to set aside their differences and negotiate a rescue plan for Social Security.  The fix involved higher taxes, change to benefit formulae, and a gradual increase in “full retirement age” phased in over many years.  The claim made at the time was that the fixes would keep Social Security solvent for another 50 years.  That was 1986.   As we monitor events today, the Social Security “Trust Fund” is due to be depleted in the early 2030’s, less than 10 years from now.  That is pretty close to the 50 years that the experts predicted back when the last reforms were announced.  It is also probably around the time when yours truly will be claiming his Social Security benefits.  Swell.

It is now time to go back to the drawing board.  If a politician is going to stand up and support social security, then that politician needs to admit that changes are needed to keep the system viable for another generation.  I don’t mean wholesale structural changes such as privatization (which would not have public support) – but the same kind of changes to taxes, benefits, or future retirement ages that O’Neill and Reagan put in place in 1986.  Leaders of both parties should agree to give each other political cover to allow discussion of the topic without demagoguery.  A bipartisan commission should be tasked to come up with a solution, and congressional leaders, the president, and other political thought leaders should commit to fair and honest debate on the topic. 

Honest leadership would start by explaining to the people that yes, there is a problem – but that it can be fixed.   Admitting that there is a problem will at least open the door for debate.  It’s not that the public NEEDS to be told – they already know there is a problem.  But when the politicians go around pretending that the problem doesn’t exist, the public assumes that nothing will be done to fix it.  As a result, seniors fear their social security benefits will be drastically cut when the trust fund runs out.  Meanwhile, a recent poll suggested that 47% of millennials either strongly or somewhat agreed with the statement that social security will not be available for them. Neither needs to be true, but we need to talk about it!    

This Morningstar article https://www.morningstar.com/articles/1140581/how-to-balance-social-securitys-books does a nice job explaining how some very minimal changes could fix Social Security for another 75 years.  Relatively minor increases in payroll tax, changes to benefit structure, and/or changes to retirement ages for future retirees would solve the problem, if only we had leaders willing to lead.  Honest people can disagree on how much to rely on benefit changes, taxes, or retirement age increases – but if we reached such a compromise in 1986, we can do so again!  For my part, I am giving points to my members of Congress who are honest and brave enough to tell voters that the issue is important, the status quo is unsustainable, and needs to be dealt with in a responsible way.  I am still waiting.