Sisters Talking On…Social Security solvency

Point for Discussion

People expect Social Security to be there for them when they retire.  They’ve paid into it for years, along with increasing income tax rates, increasing income caps, and raising the full retirement age – all with the promise that we’ll receive income to help in retirement years in exchange for allowing the government to use these tax dollars for decades.  How can we make Social Security secure so we can count on it when we need it most?

Points of View


As I’ve been planning for retirement, I’m sure I’m not alone, in seeing many articles over the years about the potential of the government not being able to pay the full amount owed to us if something isn’t done to ensure its solvency.  The good news is, there are many things that could be done to avoid any risk to its solvency.  The bad news is, that each administration “kicks the can down the road” without implementing a long term solution.

To be fair, some updates have been made that make sense in the current environment – increasing the income cap makes it more manageable for those paying in, and raising the retirement age is logical given that many are living longer (though recent studies indicate the average age may be declining).

That said, the program should be self-funding without any of these changes.  For example:

  • While boomers and older seniors are beginning to draw from Social Security, there were DECADES where the only draw was disability and supporting programs, where billions of dollars were held and invested to meet the expected demand. And the last year of the strong economy should have re-built much of the decline from the recession.  The aging population was a planning and forecast variable, not an excuse for a shortfall.
  • Those who start receiving Social Security early, earn less than those who wait until full retirement age, helping to balance the financial obligation over time.
  • The population is now nearly split between Boomers and Millennials & Gen X meaning that nearly as many are (or will be) paying in as receiving benefits (albeit at a lower level until they reach peak earnings).
  • Older seniors, whose Social Security amount is based on their income from many years ago (with some cost of living increases) may have earned less then than Boomers retiring today, thereby further calibrating against a higher average age requiring funding.
  • Raising the full retirement age and raising the income cap should be resulting in a surplus, and making up for any market downturns and loss in the fund.

I’m not sure if Lynn would fully agree with me, but some potential solutions that I see to ensure full solvency for “Next Generation Social Security,” could be:

  • Mandate that social security taxes paid can only be used for social security payments to those paying in (understanding there are exceptions for lower income individuals and those disabled prior to working age).
  • Through research on this topic online, I’ve learned that many receive social security even if they have never paid in (e.g., families and others). This “family” payout should be reassessed for current times, and an appropriate cap applied.
  • Similarly, women who were married at least 10 years and divorced a working spouse can receive benefits, even if they’ve never worked outside the home (e.g., potentially paying a high social security benefit to 2-3 women, rather than 1 payout to the tax payer.). It made sense then for homemakers, and should continue for them, but going forward, with women dominating the workforce, this should change.
  • Disability payments should only be paid to those who paid in before the disability occurred – period (understanding they would not have necessarily met the minimum required taxes, and some will receive if disabled from birth or prior to reaching working age).
  • Eliminate the income cap – it’s less painful to pay a constant rate in earning years.
  • Increase the tax rate for Social Security by a low percentage each year (e.g., 0.3% – TBD based on a forecast), so it’s manageable (i.e., some sources are saying a 36% tax would be required in the future if we wait to make changes – this would be outrageous).
  • Those who earn above a certain level (e.g., the top 1% – 5%), who don’t need Social Security, should not draw from it (unless their situation changes).
  • For those just starting to pay Social Security taxes, raise the full retirement age. It wouldn’t make sense to go beyond 70 years for anyone, especially those who have already paid in for their full careers.
  • Require a full reserve of social security dollars based on a forecast of age at which social security payments begin (e.g., XX% at 62 years, XX% at 67, XX% at 70, etc.), and hold those dollars at a fixed rate (even if low) to avoid loss. This fund should not factor in to the deficit since it should be a net neutral fund (e.g., bring in what it pays out).
  • Further update the forecast to reflect reality (more dollars paid in by boomers who are earning at peak and working longer; fewer dollars for downturns).
  • Eliminate fraud in the system. It would be worth the investment to hire a small team to focus on this (e.g., payments to deceased persons, multiple payments to the same person, and identify all sources of fraud).

Whatever changes are made, need to be made soon so that people can plan.  It’s unreasonable to change the rules when people have been planning for years, so re-set the rules as younger people are beginning to pay Social Security taxes, and let’s get started.

I know that when I am ready to draw from Social Security, I am going to expect to receive 100% of payment due to me, and you should, too.  Let’s make “the powers that be” accountable without letting them say “we will only be able to pay 66% of benefits by 2034.”  If they see this as an issue, they should address it now.  That’s what people do – foresee an issue, and act to prevent it – and it is what we expect from our representatives.


The Social Security system was established in 1935 as a way to assist our older citizens as they aged and could no longer work.  At the time, life expectancies were much lower than they are today.  The average life expectancy in 1935 was 61 years of age.  So a system that paid upon full retirement at 65 would have paid a monthly stipend for the few remaining years left.  Add to that the large number of workers contributing to the system for each retiree – in 1935, this was 37 workers to each retiree receiving Social Security benefits.

By 2015, life expectancies have reached an average of 77 years, and now there are just 3 workers supporting each retiree.  Based on these numbers, it’s not hard to see how strained the system is today and not hard to imagine a day when the system may have funding challenges.

I was not happy when the full retirement age, by Social Security rules, was increased to 67 years of age.  At the time, I just didn’t understand.  Now that I do, my conclusion is the same as many others, we need a plan, as a nation, to ensure care for our elderly.

The Federal government made a pact with all of us in the private sector.  We contribute to the Social Security system, and when we retire and reach a certain age, it will be there for us.  Did we have a choice?  In the private sector, no.  We all contributed several thousand dollars a year to a system that should supplement our retirement.  For the last 15 years that I was working, I was convinced that I would receive about $250 per month when I was old enough to begin collecting social security.

While I no longer believe that, I am not yet convinced that the system won’t be changed again before I reach an age where I am eligible to receive benefits.

Just like the Defined Benefit Pension Plans historically offered to employees by large corporations, the current Social Security program is proving to be very expensive as people collect for many more years than anticipated, and the pool of workers contributing cannot support the system long term.  As I see it, there are a couple of options to fixing the system – privatization or increasing the full retirement age.

  • I was a huge proponent of privatizing the Social Security system for many years. If the government continued to spend itself into huge levels of debt, how could I rely on them to have the funds to pay me my benefits?  I was sure I could do a better job.  But then I took a step back and looked at the bigger picture.  I have contributed for many years.  If the system were privatized, how would the government administer the transition?  Would it start with those that are just entering the workforce, leaving the rest of us under the current system?  Would the government manage the funds, hire an asset manager, or set up private accounts for each of us and allow us to manage our own accounts?
  • The thought that the government would raise the retirement age again to help manage this is a bit frightening, though it may be necessary as the work force ages. This may mean that older workers will be less inclined to retire making it more difficult for younger folks to find work.  Alternatively, if older workers are forced to retire for health reasons before they reach Social Security eligibility, it will be challenging for them to make ends meet until they reach that age.

I believe the system needs to be revamped in some way.  Raising the retirement age makes some sense since we are generally living longer.  While life expectancies have declined for the past couple of years, (this has largely been due to opioid overdoses and suicides, two very serious social issues that must be addressed and soon), the decline has not been significant.   There has also been some talk of limiting eligibility based on need.  This has not yet been defined, which is a bit unnerving.

There is one more option to be considered.  That would be printing more money.  The government has the ability to do this, but there would be some serious consequences, if this is the decision that is made.  Printing more money to ensure solvency of the system would devalue the US dollar, and could cause severe inflation.  To counteract this, interest rates would go up.  Everything we buy and/or finance would be more expensive. So we’d get our Social Security but it wouldn’t go very far.

There are many decisions to be made by those responsible.  Our role in this is to make sure our elected representatives are acting in our best interests.  It is unfortunate that they have no skin in the game since they get a government pension, but they serve us and we need to make sure that they remember that.

Our Question to You

What do you think should be done to improve the solvency of Social Security so that it is there for you when you retire?

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