As Insolvency Moves Closer, Alternatives are Surfacing - CATO Institute

As nearly everyone following Social Security’s financial plight is aware, the 2025 Social Security Trustees Report highlighted the loss of three calendar quarters in the time buffer between now and full depletion of the program’s trust fund reserves. The Old Age and Survivors Insurance (OASI) trust fund lost over $100 billion in 2024 and is projected to decline by more than $200 billion by the end of 2025, reaching zero in early 2033. Absent corrective action from Congress, the program’s beneficiaries — some 70 million now and many more by then — would see an across-the-board reduction of 23%.

The likelihood of the insolvency predicament described above is anybody’s guess at this point, since the Trustees have repeatedly highlighted the problem for the past three decades. As the program approaches the 2033 cliff, it’s reasonable to expect that Congress will step up and take action to address the much-publicized shortfall, just as it did in 1983 with Social Security amendments. Numerous proposals have been advanced over the past few decades for evaluation by the program’s actuaries, but none has reached the point of consensus. As many suspect, the closer we get to the end date, the more disruptive whatever corrective measures are implemented will be.

Given the severity of the situation, it seems likely that some proposals to address Social Security’s problems will involve significant reform. One example of an outside-the-box approach can be found in a research paper issued by CATO Institute’s Romina Boccia and Ivane Nachkebia calling for consideration of a “flat Social Security benefit at 125 percent of the federal poverty level.” In their analysis, this approach would resolve the financial shortfall and reinforce the program’s fundamental objective of “protecting seniors from poverty when they can no longer work while enabling younger generations to save more on their own.” Read their post on the subject here and review the details in their research paper (see the link in the post).

That’s one approach…there are, as noted earlier, others under evaluation. As an example of the leading thoughts on reforming Social Security for the long haul, the Association of Mature American Citizens (AMAC, Inc.) believes Social Security must be preserved and modernized to meet the demands of 21st-century economics. AMAC’s position is that this can be achieved without payroll tax increases through relatively slight program modifications, including changes to the cost-of-living adjustment (COLA) process and modifications to the formulas for calculating payments to higher-income beneficiaries. Changes to the age for maximizing benefits are included in AMAC’s position, along with (1) an increase in the thresholds where benefits are subject to income tax; (2) indexing of these thresholds annually to account for inflation; (3) improved survivor benefits, (4) eliminating the reduction in benefits for those choosing to work before full retirement age; and (5) improved savings tools for future retirees, including a savings account that builds estate value. AMAC is resolute in its mission to preserve Social Security for current and future generations and has garnered the attention of lawmakers in D.C., meeting with numerous congressional offices and staff over the past decade. To learn more about AMAC’s plans, click here.

The first link provided above connects readers to the full content of the posted article. The URL (Internet address) for this link is valid on the posted date; socialsecurityreport.org cannot guarantee the duration of the link’s validity. Also, the opinions expressed in these postings are the viewpoints of the original source and are not explicitly endorsed by AMAC, Inc.; the AMAC Foundation, Inc.; or socialsecurityreport.org.

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