CRR Weighs In on Social Security Solvency - 401kspecialistmag.com; CRR
A recent post on 401kspecialistmag.com by Editor-in-Chief Brian Anderson analyzes comments from Center for Retirement Research at Boston College Director Alicia H. Munnell concerning the urgent need for corrective attention to address the looming Social Security solvency problem. Referring to the recent CRR “Social Security’s Financial Outlook: The 2024 Update in Perspective,” Anderson recaps Ms. Munnell’s “potential solutions” aimed at staving off the projected substantial benefit cut forecasted to hit about nine years from now.
Included in the CRR brief is an analysis of the impact of immediately raising the payroll tax by 1.75% for employees and 1.75% for employers, a move which Ms. Munnell believes would enable Social Security to honor benefit commitments scheduled “through 2098, with a one-year reserve at the end.” The new combined payroll tax rate of 15.9% combined with growth in taxable payrolls,, she suggests, would eliminate the $22.6 trillion long-term financial shortfall. Her conclusion, however, notes that a tax increase of this type “would be a difficult sell to politicians, businesses and a general public leery of any tax increase.”
The second suggested reform measure noted in the CRR brief involves something that has been advanced in the past but never enacted…the use of equity markets as an investment strategy for Social Security’s OASI reserves. The brief suggests that equity investment could help cover costs over the next 75 years and beyond.
Arguably, one of the most compelling themes introduced by Ms.Munnell in the CRR brief is the notion that Social Security is running out of time. Corrective action taken sooner than later would go a long way toward stabilizing confidence in America’s retirement system. It is generally well-known that making program adjustments too close to the end of the solvency period will likely exacerbate the impact on program participants and leave too little time to adjust for the changes.
Read the full Brian Anderson post here. For the full CRR brief, click here.