Social Security’s piggy bank is getting tapped out with baby boomers retiring and seniors living longer. But, new measures could ensure better benefits for all.
Fifty-two million people depend on those benefits, but this year is the first dip into the Social Security trust fund in 35 years.
Why? Because Social Security benefits paid out exceeded the tax revenues that fund the program.
By 2034, the trust fund reserves are expected to be all used up. Revenues, at that time, will only cover 4/5ths of the promised benefits.
So what can be done to save Social Security? It’s simple — sort of — if you can get a lot of people to agree.
The short answer is just seven words: raise more money and pay out less. Some options include the following:
- Higher payroll tax which would raise the level of earnings subject to Social Security taxes. On January 1, a payroll tax increase went into effect on earnings of $132,999.
- Reducing benefits for high earners, reducing the number of years workers collect, or raising eligibility ages. Those types of changes could be phased in for younger workers.
- Since people are living, another answer could be working longer and delaying benefits as a way to extend the piggy bank funds. Social security allows you to claim benefits starting at age 62, but you can wait until 66 or 67 for full retirement. The potential upside is a bigger Social Security check. The average payment is $1,347.46.
Not everyone who lives longer is able to work. Most often, high income earners work longer, but health issues plague less educated workers.
A national survey discovered that by their early 60s, a quarter of high school graduates and 37 percent of those without diplomas couldn’t work because of their heath.
The Urban Institute suggests raising early retirement age to 65 and full retirement to 70, but build in safeguards for those who can’t work.
“It’s good for people, it’s good for government tax revenues and it could fuel economic growth,” said Dr. Richard Johnson of the Urban Institute which recently issue a report on raising the retirement age.
For more information, read this New York Times article.