Social Security will go bankrupt in less than twenty years unless we make significant legislative changes. And the longer we wait to address the problem, the more expensive it will be to fix it – especially for low-income Americans who rely on it to keep them out of poverty.
The Challenge of Social Security
America spends close to trillion dollars a year on Social Security benefits for retired Americans, their spouses, and the disabled. And while we’re receiving close to a trillion dollars in tax revenue, the future is nothing but deficits. Without legislative changes, the trust funds will go bankrupt by 2034.
How can that be? Every working American pays into Social Security with each paycheck, leading them to believe they’re fully funding benefits for themselves far into the future. But that’s unfortunately not the case. Tax revenue today is used to pay benefits for current retirees, not invest in future benefits. Future retirees will have to rely on the same pay-as-you-go transfer, and there won’t be enough workers to pay out all of the promised benefits.
When the trust funds run out of money, benefits will have to be cut and taxes will have to go up. The people who are going to be hurt the most are those who are low-income and rely on it as the majority of their retirement income.
Social Security affects you even if you’re not close to retirement. You start paying into Social Security as soon as you start earning money. And while many people may not intend to rely on it to provide all of your retirement income needs, they end up saving less than they would otherwise need because they’re assuming that they’ll receive what they’ve been promised.
For most of its history, Social Security has brought in more money than it has paid out. But we’re reaching the tipping point where that’s not the case anymore. More and more of Social Security’s benefits will have to come from drawing down the trust funds, which in practice means less money to spend on other critical government programs.
The longer we wait to fix Social Security, the costlier and more disruptive to people’s lives it becomes. There are many ways to fix Social Security and each side of the aisle has their preferred solutions. No matter how we choose to do reform the program, the time to start is now.
Know your facts
Social Security is a pay-as-you-go system: The federal government takes a portion of your paycheck and uses that money to send checks to current retirees.
When Social Security began sending out checks, 49 workers provided the benefits for each
Today, there are only three workers to support each retiree.
When Social Security began sending out checks, life expectancy was much lower; the average American died 1.5 years before they were even eligible to collect benefits. Today, the average American lives longer and collects benefits for 12 or more years.
If Social Security continues along its current path, the program’s trustees estimate that the Social Security trust fund will dry up by 2034.
When the fund dries up, the law requires Congress to reduce benefits for everybody by the percentage of the shortfall. Translation: Every American senior citizen would see an immediate, real-time 21% cut in their monthly check.
In 2016, only 11% of Americans ages 18 to 35 thought Social Security and Medicare should be among the next president’s top priorities.
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