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Making small, gradual changes vital to keeping Social Security solvent

3 min read

Trustees of the Social Security trust fund released their newest estimates on the future of the fund. They are required every year to do a 75-year projection of the financial solvency for the trust fund, and they project the fund will be exhausted by 2034, one year sooner than it was estimated in last year’s report.

The trustees are secretaries of Treasury, Labor, Health and Human Services and the commissioner of the Social Security Administration.

SS has always been intended to be a pay-as-you-go system, in which current workers pay into the fund for retired workers. Congress did not put a large amount of money into the fund to get started. Once the trust fund is depleted, retirees are projected to see a 23 percent reduction in their benefit check. This would be funded from tax revenues coming in from current workers.

For a number of years, tax revenue has not been enough to fund benefits. But the interest earned on the fund balance has been enough to make up the difference.

This is projected to change in 2018. Total reserves for both the Social Security OASI and DI at the end of 2017 stood at $2.89 trillion. While this seems very large, we will run a $2 billion deficit this year and the deficit will increase every year to come.

About 51 million retirees and their dependents are collecting retirement benefits and another 10 million people are collecting disability. While the trust fund benefited from working baby boomers for decades, it is now feeling the strain of 10,000 boomers turning 65 every day. There are fewer workers paying into the system for every retiree receiving benefits.

People are living longer and collecting more total money. Most people receive way more back in SS benefits than they ever paid in.

This is the first time since 1982 that the country has faced this crisis. Then Congress, with bipartisan support, adjusted the tax rate and made some adjustments to age requirements. These changes 35 years ago have served us well.

It is time for Washington to get its act together and assure that this important program is there for Americans going into the next century. No politician can honestly claim he or she is going to protect SS without making some changes. The current math will not work.

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 the ability to adjust to them. Waiting until the crisis is imminent will require much larger changes and will impact only younger generations.

Congress will fix the problem someday because if people are receiving only 73 percent of their SS checks, no member of Congress would get re-elected. It is time to start small changes and quit making a political issue of a program so important to the American people. You cannot fix a problem by ignoring it.

Gary Boatman is a Monessen-based certified financial planner and author of “Your Financial Compass: Safe passage through the turbulent waters of taxes, income planning and market volatility.”

To submit columns on financial planning or investing, email Rick Shrum at rshrum@observer-reporter.com.

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