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.
This posting is presented for informational purposes only and does not represent legal or financial guidance. Any opinions or interpretations presented are either those of the original author or, in the case of articles authored by the AMAC Foundation, are the opinions of AMAC Foundation staff, originally trained and accredited by the National Social Security Association (NSSA) and certified via the AMAC Foundation. Any links included in the article are valid on the posted date; socialsecurityreport.org cannot guarantee the duration of the links’ validity. NSSA and the AMAC Foundation and its staff are not affiliated with or endorsed by the Social Security Administration or any other governmental entity. To submit a question, visit our website (https://amacfoundation.org/services/) or email us at ssadvisor@amacfoundation.org. Because we are a non-profit organization, there is no charge for these services.