Financial planners preach it, young folks assume it, older folks fear it: Social Security is going broke. Your benefits will be cut. Don’t plan your retirement around it.
As labor journalist Jane Slaughter writes for Labor Notes (link here), this mantra is working:
Polls show that six out of ten Americans who aren’t yet retired think Social Security won’t be there for them—with the youngest workers the most pessimistic. And more than half of current retirees predict their benefits will be cut.
Yes, the crush of Baby Boomers hurdling towards retirement means that considerable strain will be put on America’s Social Security system. Two years ago, the Social Security Administration advised that by 2019 it will be “paying more in benefits than we collect in taxes,” and by 2041 it will have sufficient funds “to pay only about 78 cents for each dollar of scheduled benefits.”
In addition, no one should assume that even full Social Security benefits are sufficient to fund a relatively comfortable retirement. Indeed, the overall retirement readiness of many Americans — as measured by personal savings, retirement accounts, and pensions — is not a pleasant subject to ponder.
The sky is not falling
But Social Security remains one of America’s most stable benefit programs. As Slaughter notes, even the anticipated shortfall can be addressed fairly and cleanly:
There’s an easy and equitable solution: make high earners pay their fair share. Today, most workers pay the 6.2 percent FICA tax on their entire incomes. But the fortunate ones—roughly the top 6 percent of earners–pay FICA only on their first $106,800. Eliminate that cap, keep their benefits the same, and we’d end up with another surplus after 2037.
An agenda behind the fear-mongering?
Despite the availability of this easy fix to close the anticipated gap, during the upcoming months we may be hearing a lot from Washington D.C. about the need to reduce benefits and raise the retirement age. According to political journalist William Greider (also writing for Labor Notes, link here):
An appalling consensus has developed among Washington elites: they tell themselves cutting Social Security is a slam-dunk. If the two parties will hold hands and act together, they reason, voters can’t blame either one. When Washington players talk up “bipartisan compromise,” it usually means the people are about to get screwed.
Check it out
Bravo to Labor Notes, a true bulwark of labor journalism, for this excellent package of articles in its September issue exploring the underlying politics and realities of America’s Social Security system, all of which can be accessed here.