Social Security celebrates its 89th birthday today, and there is much to celebrate. Social Security touches the lives of virtually every American. Almost 97 percent of the older population in the United States will receive Social Security benefits, averaging more than $1,800 monthly for retired workers. Social Security has evolved into one of the most popular and effective anti-poverty programs in the U.S., but it is at a critical juncture. The Social Security Trust Fund faces a looming financial shortfall, and Congress and the White House must take action to avert an across-the-board cut to the benefits that retirees depend upon to pay their day-to-day living expenses.
In fact, the American people want Congress and the next presidential administration to act now to address the funding shortfall. Public opinion research from the National Institute on Retirement Security (NIRS) found that an overwhelming 87 percent of Americans want a funding solution now rather than waiting another ten years when the trust fund is projected to be exhausted. This demand for immediate action was consistently high across age, gender, and political party affiliation.
An overwhelming 87 percent of Americans want a funding solution now rather than waiting another ten … [+]
Americans Want Action Now on Social Security Because They Need It
It’s not surprising that Americans want action. The same survey found nearly three-fourths (72%) of Americans say they need Social Security benefits to remain at their current benefit levels to have a financially secure retirement. This finding also was consistent across age, gender, and income.
Data from the Social Security Administration (SSA) revealed the vital importance of Social Security benefits for middle-class Americans: Social Security comprised more than half of total income for 49 percent of married couples aged 65 or older in the third quintile of income. Social Security is even more important for single persons aged 65 or older, comprising more than half of total income for 91 percent of single persons in the third quintile.
Nearly three-fourths (72%) of Americans say they need Social Security benefits to remain at their … [+]
It’s worth emphasizing that Social Security is not going bankrupt. SSA has deposited surplus revenues into a trust fund for decades, and that fund has grown over time because surplus revenues are invested in federal government bonds. Even if that trust fund is depleted, by law, the program will continue to pay benefits in line with revenue collected from payroll taxes.
If Federal Policymakers Fail to Implement A Funding Fix, Americans Will Face Big Social Security Benefit Cuts
When the last major reform was undertaken, the demographic and longevity changes were anticipated. Thus, the plan was to build up surpluses to carry the program through the years when many Baby Boomer retirees would be receiving benefits. This is why the trust fund was established. This worked largely as planned, as a surplus accumulated. But a little more than a decade ago, SSA began paying out more in benefits each year than the agency collected in payroll taxes. The agency was able to do this by utilizing the surpluses from earlier years in the trust fund.
SSA now projects the trust fund will last until 2033, according to the latest report of the Social Security Trustees. That is when benefits would either be cut to be in line with current revenues or some other changes would have to be made by law.
The potential benefit cut is projected to be approximately 20 percent for all current and future beneficiaries. In practice, it’s hard to imagine those reductions would be allowed to occur. To avoid such a large cut, Congress must take action soon to resolve the difference between benefits and revenues by adjusting benefits, increasing revenues, or a combination of the two.
The American people clearly understand the importance of this Social Security funding issue. An astounding 87 percent say that Social Security should remain a priority no matter how bad budget deficits get, including a solid 55 percent who strongly agree with that sentiment. This belief in the priority of Social Security is high across age, gender, income, and party affiliation, with 86 percent of Republicans agreeing that Social Security should remain a priority.
While Americans have decidedly mixed views about raising the full retirement age for Social Security benefits, they more strongly favor increasing what workers and employers pay into the system, as well as expanding Social Security benefits. This balancing of priorities perfectly captures the dilemma facing American political leaders in the coming discussions that will focus on bringing the program into long-term fiscal balance.
As we celebrate Social Security’s birthday today, we should think clearly about what we want from this critical program for the next 89 years. But we also need to keep in mind: the sooner Congress acts, the less costly the solutions ultimately will be, and the less time this serious threat hangs over the heads of our seniors.