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Sounding the Alarm: Social Security in Financial Trouble - Morningstar
In somewhat of a “Johnny-come-lately” mayday alarm, this MorningStar article by Jessica Hall reports that the latest from the Congressional Budget Office (CBO) is that Social Security’s reserves may be fully depleted in about the year 2032 – an issue that we have been reporting on this site for years. Nevertheless, the latest CBO report suggests that Congress, in its infinite wisdom, has managed to accelerate depletion of the SS Trust Fund, rather than slow things down. Fact is, Social Security is in urgent need of a complete reform to restore the program to solvency, and that needs to be done soon, before a cut in everyone’s monthly SS benefit occurs. While this article is a stark reminder of the problem Social Security is facing, it shouldn’t be viewed, as Chicken Little would say, as “the sky is falling.” The sky isn’t falling yet, but unless Congress acts soon, Social Security will be forced to implement an across-the-board slash in benefits in about 7 years. The good news is that Congress already knows how to prevent that, but they just apparently lack the political courage to accomplish it.
As an example of leading thinking on reforming Social Security, the Association of Mature American Citizens (AMAC, Inc.) believes Social Security must be preserved and modernized to serve future generations. AMAC’s position is that this can be achieved without payroll tax increases through relatively minor program modifications, including changes to the cost-of-living adjustment (COLA) process and modifications to the formulas for calculating initial benefits for 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) changing the taxable maximum formula to address the unintended loss of revenue; (4) improving survivor benefits, (5) eliminating the reduction in benefits for those choosing to work before full retirement age; and (6) improving savings tools for future retirees, including a savings account that builds estate value. AMAC is resolute in its mission that Social Security be preserved for current and successive generations and has gotten the attention of lawmakers in D.C., meeting with many congressional offices and staff over the past decade. See AMAC’s proposal for Social Security reform here.