Update on the Social Security Solvency Dilemma - Kiplinger

Lisa Gerstner, Contributing Editor for Kiplinger’s Personal Finance, provides an analysis of the Social Security solvency dilemma in a post on Kiplinger.com’s Retirement page. Her remarks provide an effective summary of the funding problem, rightfully noting that declining birthrates and the resulting change in the ratio of beneficiaries to taxpayers is a major contributor to the problem. (There are others, of course, that contribute in a major way to the solvency issue, among them increased longevity and the substantial decline in interest rates and the resulting loss of income for the program).

With these comments, Ms. Gerstner’s article highlights the importance of Social Security benefits to seniors: “Overall, Social Security benefits represent about 33% of income among those 65 and older, according to the Social Security Administration. Half of married couples and 70% of single people rely on Social Security benefits for 50% or more of their income. And 21% of married couples and about 45% of unmarried people receive at least 90% of their income from Social Security.” She follows this analysis with a reaffirmation that, absent corrective action by lawmakers, beneficiaries could be facing a substantial–20% to 25%–cut in benefits in the not-too-distant future. But after discussing the problem and the potential impact on seniors, she offers a glimmer of hope with the sentiment that action on the legislative front is likely, and that scheduled benefits for current and near-term beneficiaries are likely to remain intact.

The balance of Ms. Gerstner’s article focuses on Social Security reform measures that will likely be considered. As anticipated, the “fixes” could be expected to focus on either raising revenue through taxes or changes in the benefit structure. Quoting Shai Akabas, director of economic policy for the Bipartisan Policy Center, a Washington, D.C., think tank, she notes “Almost any realistic solution at this point, given where the program’s finances are today, will need to include some of each of those categories,” he says.

Ms. Gerstner’s post includes commentary on some of the legislative changes already under consideration, and includes suggestions for those nearing retirement as well as those taking a longer view of financial planning for their retirement years. Whether and when reform will happen, of course, is anyone’s guess. The article puts it in perspective with this quote from Alicia Munnell, director of the Center for Retirement Research at Boston College. “You just need people with the political will to put together a package that would solve the problem.”

No matter how you cut it, Social Security reform is a big–and very important–deal affecting a major segment of the U.S. population. It’s not a new issue, either. In fact, the Association of Mature American Citizens (AMAC) has been advocating for Social Security reform for nearly a decade, and has put forth a comprehensive proposal designed to preserve this important program for current and near-retirees and to also modernize it for successive generations. For more information on this proposal, check out this post from earlier this month.

Notice: 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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