What does fixing Social Security mean? It can mean one of two things. First, assure the Trust’s solvency for the next 75 years (the period used by the Trustees). Second, assure the solvency AND the permanent sustainability of the program.
In the next few months you will hear a lot of rhetoric about Social Security, unfortunately much of it misleading and designed to scare seniors. And, much of the rhetoric will be unaffordable promises about “expanding” Social Security; yet to be defined.
Like Social Security or not, it’s here to stay and nobody seems to care that from a financial perspective for the individual it’s not a great deal; none of that matters.
The CRFB provides a handy tool where you can select various options changing Social Security and its funding and see the impact on solvency and sustainability. Here are a couple of options I selected. Note I did not cut benefits in any way, but only raised revenue. Other possibilities include changes in future benefits.
Give it a try yourself at the link below.
The above changes meet the 75-year solvency test only, but it puts the full burden on current workers. The payroll tax increase is split between employer and worker (1.05% each). Currently contributions to a flexible spending account or health savings account are not subject to FICA payroll taxes and neither are health insurance premiums paid on a pre-tax basis (“Cafeteria Plans”).
The above changes are more aggressive making the program sustainably solvent. Note that in this case taxing all wages means that the final monthly benefit is also based on all wages thereby maintaining the original intent of Social Security.
Now that you see what it takes to keep SS going as it is, you might want to listen closely when you hear about expanding benefits.
The Committee for a Responsible Federal Budget (CRFB) is a bipartisan organization, made up of some of the nations leading budget experts, committed to educating the public about issues that have significant fiscal impacts.
Categories: Social Security